On July 19th, the National Labor Relations Board (NLRB) may have finally waved the white flag on its radical attempt to redefine employment in the United States. The NLRB filed to dismiss its Fifth Circuit challenge of the Texas district court ruling that invalidated its new “joint employer” standard. This standard would have altered a decades-old test that determines whether two separate employers can be held liable for labor relations negotiations. The original standard was established in the 1980s, and depended on “direct and immediate control” over the terms and conditions of employment, such as hiring, firing, hours, wages, and other critical variables. Since 2015, the NLRB under President Obama and now President Biden sought to upend this commonsense standard.
The traditional standard essentially means the boss who tells you when to show up and how much your paychecks are is also the employer at the union bargaining table. The radical new standard would have changed the test to include “indirect or reserved control.” This incredibly nebulous term created an environment ripe for lawsuits and uncertainty for small businesses, especially franchise business owners. According to the International Franchise Association, the expanded joint employer standard cost franchise businesses “$33 billion per year, resulted in 376,000 lost job opportunities, and led to 93% more lawsuits.” This costly standard has become a political football over several administrations. Taxpayers suffer from the cost of compliance with this regulation, uncertainty over its future, and in the direct costs of litigation.
Now, in the major questions and post-Chevron era, hopefully the NLRB recognizes the futility and overreach inherent in attempting to radically alter the definition of employer-labor relations without statutory changes. The traditional standard is one that has been effective over its lifetime and has a clear bright-line test to comply. Any further changes must reflect the decades-old precedent and return to “direct and immediate” control.