On May 3, President Biden vetoed a bipartisan Congressional Review Act (CRA) resolution to set aside the Nation Labor Relations Board’s recent rule on joint employment status. The CRA passed both the House and Senate with bipartisan support before landing on President Biden’s desk for signature.

The NLRB’s rule, which became effective on February 26, 2024, establishes a new standard for determining whether two employers may be defined as joint employers of an employee under the National Labor Relations Act. Under the new rule, an entity may be considered a joint employer of another employer’s employees if the two share or codetermine at least one of an employee’s essential terms and conditions of employment. The rule replaces a prior standard, which required a showing of “substantial direct and immediate control” over the essential terms and conditions of an employee’s employment for employer status to trigger.

The NLRB’s rule is a significant expansion from traditional notions of agency and is likely to cause confusion and uncertainty about how small- to medium-sized businesses run their operations. The rule will discourage larger companies from contracting with smaller organizations over fear that they may have joint employer responsibility for any entity hired down the chain.

In response to these concerns, and as part of President Biden’s veto, the Biden Administration stated that “without the NLRB’s rule, companies should more easily avoid liability simply by manipulating corporate structure, like hiding behind subcontractors or staffing agencies.” Yet these comments appear misguided in the face of the significant concerns raised by industry stakeholders and Congress.

MHI will continue to monitor this rule and will provide updates on whether the veto will remain unchallenged by Congress.

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