Updated March 10th, 2024 at 10:53 IST

Federal judge strikes down NLRB rule on contract, franchise workers

NLRB Chair Lauren McFerran expressed disappointment with the court's decision but stressed that the board was actively exploring its options.

Reported by: Business Desk
NLRB Chair Lauren McFerran expressed disappointment with the court's decision | Image:Unsplash
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A federal judge in Texas has invalidated a rule by the US National Labour Relations Board (NLRB) that would have expanded the definition of employers for certain contract and franchise workers, potentially requiring them to negotiate with unions representing those workers.

US District Judge J. Campbell Barker, based in Tyler, Texas, sided with the challengers of the "joint employers" rule, including the US Chamber of Commerce, deeming it overly broad and in violation of federal labour law. The rule, slated to take effect on Monday, has been deemed invalid by Barker as it would classify some companies as employers of contract or franchise workers, even when they lack significant control over their working conditions.

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In his ruling, Barker highlighted that the rule would encompass nearly every entity contracting for labour, irrespective of their level of influence over essential terms and conditions of employment.

NLRB Chair Lauren McFerran expressed disappointment with the court's decision but stressed that the board was actively exploring its options. The NLRB is anticipated to appeal Barker's ruling to the 5th US Circuit Court of Appeals in New Orleans.

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Industries heavily reliant on staffing agencies and contractors, such as manufacturing and construction, as well as franchisers like McDonald's, Burger King, and Dunkin' Donuts, stand to be affected by the joint employer rule.

Under the contested rule, companies would be considered joint employers if they exert control over key aspects of workers' conditions, including pay, scheduling, discipline, and supervision, even if the control is indirect or not actively exercised.

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While the NLRB and several unions advocate for the rule to ensure accountability and collective bargaining rights for workers, business groups and many Republicans argue that it would cause confusion and disrupt franchising and contracting norms.

The issue of joint employment has been contentious for US businesses, with varying standards adopted by different administrations. The rule proposed under President Joe Biden's administration would replace the one implemented during Donald Trump's presidency.

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The legal battle over joint employment underscores the complexities and divergent perspectives surrounding labour relations and employer classifications in the United States.

(With Reuters inputs)

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Published March 10th, 2024 at 10:53 IST