IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF TEXAS

TYLER DIVISION

CHAMBER OF COMMERCE OF THE 

UNITED STATES OF AMERICA; 

AMERICAN HOTEL AND LODGING 

ASSOCIATION; ASSOCIATED BUILDERS 

AND CONTRACTORS; ASSOCIATED 

GENERAL CONTRACTORS OF AMERICA; 

COALITION FOR DEMOCRATIC 

WORKPLACE; INTERNATIONAL 

FRANCHISE ASSOCIATION; LONGVIEW 

CHAMBER OF COMMERCE; NATIONAL 

ASSOCIATION OF CONVENIENCE 

STORES; NATIONAL RETAIL 

FEDERATION; RESTAURANT LAW 

CENTER; TEXAS ASSOCIATION OF 

BUSINESS; and TEXAS RESTAURANT 

ASSOCIATION,

Plaintiffs, 

v.

NATIONAL LABOR RELATIONS BOARD; 

LAUREN MCFERRAN, Chair; MARVIN 

KAPLAN, Board Member; GWYNNE 

WILCOX, Board Member; and DAVID 

PROUTY, Board Member, 

Defendants. 

Civil Action No. 6:23-cv-00553-JCB

BRIEF OF AMERICAN HOSPITAL ASSOCIATION AS AMICUS CURIAE IN SUPPORT 

OF PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT

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TABLE OF CONTENTS

Page

-iINTEREST OF AMICUS CURIAE.............................................................................................. 1

INTRODUCTION ......................................................................................................................... 2

ARGUMENT................................................................................................................................. 4

I. The Final Rule Imposes Significant and Disproportionate Harm on Hospitals................. 5

A. The Final Rule Harms Hospitals Due to their Necessary Reliance on 

Contract Labor ....................................................................................................... 6

B. The Final Rule Punishes Hospitals for Responsible Health and Safety 

Measures................................................................................................................ 8

C. The Final Rule Has a Dramatic Impact on Federal Funding Schemes................ 10

D. The Final Rule Fails to Recognize the Unique Labor Issues Faced by 

Hospitals .............................................................................................................. 12

II. The NLRA Did Not Require the Board to Ignore the AHA’s Concerns.......................... 14

CONCLUSION............................................................................................................................ 18

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TABLE OF AUTHORITIES

Page(s)

CASES

Browning-Ferris Indus. of California, Inc. v. NLRB,

911 F.3d 1195 (D.C. Cir. 2018).........................................................................................10, 15

Chamber of Comm. of U.S. v. U.S. SEC,

85 F.4th 760 (5th Cir. 2023) ....................................................................................................17

Clarke v. Commodity Futures Trading Comm’n,

74 F.4th 627 (5th Cir. 2023) ......................................................................................................4

Dep’t of Homeland Sec. v. Regents of the Univ. of Cal.,

140 S. Ct. 1891 (2020).............................................................................................................15

FCC v. Fox Television Stations, Inc.,

556 U.S. 502 (2009).................................................................................................................16

Gresham v. Azar,

950 F.3d 93 (D.C. Cir. 2020)...................................................................................................16

Huawei Techs. USA, Inc. v. FCC,

2 F.4th 421 (5th Cir. 2021) ..................................................................................................4, 16

Laborers Int’l Union of N.A. Local Union No. 1057 v. NLRB,

567 F.2d 1006 (D.C. Cir. 1977)...............................................................................................12

Mexican Gulf Fishing Co. v. U.S. Dep’t of Comm.,

60 F.4th 956 (5th Cir. 2023) ......................................................................................................4

Mobil Oil Exploration & Producing Se. Inc. v. United Distribution Cos.,

498 U.S. 211 (1991).................................................................................................................16

NLRB v. Baptist Hosp., Inc.,

442 U.S. 773 (1979).................................................................................................................12

St. John’s Hospital & Sch. of Nursing,

222 NLRB 1150 (1976) .....................................................................................................12, 15

Sw. Elec. Power Co. v. EPA,

920 F.3d 999 (5th Cir. 2019) ...................................................................................................17

Texas v. Biden,

10 F. 4th 538 (5th Cir. 2021) ...................................................................................................11

Univ. of Tex. M.D. Anderson Cancer Ctr. v. United States,

985 F.3d 472 (5th Cir. 2021) ...................................................................................................14

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Wages & White Lion Invs., L.L.C. v. U.S. Food & Drug Admin.,

16 F.4th 1130 (5th Cir. 2021) ..................................................................................................11

STATUTES

Act of July 26, 1974, Pub. L. No. 93-360, 88 Stat. 395.................................................................12

OTHER AUTHORITIES

29 C.F.R. § 103.40 (2022) .............................................................................................................15

29 C.F.R. § 103.40................................................................................................................. passim

42 C.F.R. § 482.12...........................................................................................................................8

42 C.F.R. § 482.15...........................................................................................................................8

42 C.F.R. § 482.23...........................................................................................................................8

42 C.F.R. § 482.41...........................................................................................................................8

88 Fed. Reg. 73946 (Oct. 27, 2023)....................................................................................... passim

Am. Consultants, Navigating Major Staffing Shortages in Healthcare

(June 28, 2019)...........................................................................................................................6

Am. Hosp. Ass’n, Comments on the NLRB’s Notice of Proposed Rulemaking Re: 

the Standard for Determining Joint Employer Status (Nov. 2023).................................. passim

Am. Hosp. Ass’n, The Financial Stability of America’s Hospitals and Health 

Systems Is at Risk as the Costs of Caring Continue to Rise (Apr. 2023)...................................6

Am. Hosp. Ass’n, Hospital and Health Systems Face Unprecedented Financial 

Pressures Due to COVID-19 (May 2020) .................................................................................6

Collective-Bargaining Units in the Health Care Industry, 52 Fed. Reg. 25142 

(July 2, 1987) ...........................................................................................................................13

Robert I. Field, Why Is Health Care Regulation So Complex?, 

33 Pharmacy & Therapeutics 607 (Oct. 2006) ........................................................................10

Victor E. Schwartz & Phil Goldberg, Carrots and Sticks: Placing Rewards As 

Well As Punishment in Regulatory and Tort Law, 51 Harv. J. Legis. 315 

(2014).......................................................................................................................................10

Syntellis & Am. Hosp. Ass’n, Hospital Vitals: Financial and Operational Trends: 

Workforce Pressures Take Their Toll in 2022 (Feb. 2023) .......................................................6

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INTEREST OF AMICUS CURIAE

The American Hospital Association (AHA) is a national not-for-profit association that 

represents the interests of more than 5,000 hospitals, health care systems, and other health care 

organizations, as well as 43,000 individual members. It is the largest organization representing the 

interests of the Nation’s hospitals. AHA members are committed to improving the health of the

communities they serve. The AHA educates its members on health care issues and advocates on 

their behalf in legislative, regulatory, and judicial fora to ensure that their perspectives are 

considered in formulating policy.

Hospitals and health systems often rely on outside contractors to perform a variety of 

functions, including nursing, environmental services, dietary and food services, security, and 

maintenance. And as the AHA explained to the National Labor Relations Board (NLRB), labor 

costs are a major cause of increased financial strain on the AHA’s members. As such, the AHA’s 

member-hospitals, most of which are subject to the National Labor Relations Act (NLRA), have a 

strong interest in ensuring that the NLRA is not misinterpreted in ways that inhibit their ability to 

rely on contract workers to meet critical staffing needs, further increase their labor costs, and divert 

limited resources from patient care. 

The AHA agrees with Plaintiffs that the Final Rule at issue here violates the Administrative 

Procedure Act (APA) and submits this brief to explain why it is arbitrary and capricious in the 

unique context of the hospital and health care industry.

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INTRODUCTION

The National Labor Relations Board has adopted a sweeping test for “joint employer” 

status that no one had understood to be the law under the National Labor Relations Act in the 90 

years since it was enacted. When the Board first proposed its novel test, the American Hospital 

Association submitted a comment letter explaining how the Board’s interpretation of the NLRA 

would inflict severe harm on hospitals by reclassifying many outside contract workers as hospital 

“employees.” In the wake of the Covid-19 pandemic, the AHA wrote, hospitals face a dual crisis 

of financial hardship and workforce shortages, requiring them to rely on staffing agencies to fill 

many roles that are critical for patient care with the very outside contract workers that will be 

deemed “joint employees” under the Board’s newfangled test. 

Giving short shrift to the AHA’s comments, the Final Rule makes these financial and 

workforce problems even worse. It deems hospitals to be “joint employers” of contract workers if 

hospitals have even minimal unexercised, indirect control over their “working conditions” related 

to health and safety. Because hospitals have both a legal and professional duty to control health 

and safety conditions for everyone working in the hospital environment, the Final Rule could result 

in virtually every outside contract worker being classified as part of a “joint employment” 

relationship with the hospital. 

By expanding the definition of joint employment in such a far-reaching fashion, the Final

Rule will penalize hospitals for adopting responsible workplace policies. It will throw a wrench 

into the complex federal funding schemes that currently pay for patient care. And it will disrupt 

hospitals’ staffing arrangements, forcing hospitals and contractors into impractical, unnecessary, 

and costly bargaining. In imposing these burdens, the Final Rule departs from the Board’s and the 

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Supreme Court’s longstanding recognition of the unique labor issues that hospitals face, which 

require tailored regulatory solutions instead of the Final Rule’s one-size-fits-all approach.

As Plaintiffs’ brief points out, these hospital-specific concerns were called to the Board’s 

attention during the rulemaking process. See Dkt. 10, at 14, 37. But instead of addressing these 

concerns in any meaningful fashion, the Board largely sidestepped them. If it wasn’t brushing off 

commenters’ reasonable concerns with conclusory responses, the Board was wrongly insisting that 

its hands were tied. According to the Board, the NLRA does not allow any alternative approaches 

to the “joint employer” inquiry that would accommodate the AHA’s legitimate concerns. The 

Board used this erroneous legal position as an excuse for failing to address and respond to the 

serious problems that the AHA identified in its comment letter. 

This Court should not allow the Board to hide behind flawed legal reasoning and 

conclusory answers to the reasonable concerns of the AHA and other commenters. It is implausible 

to suggest that the NLRA requires the novel and sweeping “joint employer” test that the Board has 

recently devised, which nobody ever understood the NLRA to require for the first nine decades of 

the statute’s existence. And even if the Board’s novel rewriting of the law were somehow 

permissible under the NLRA, there is no serious question that the Board had discretion to adopt a 

less sweeping standard. For one thing, the Board could have adopted the approach reflected in its 

own previous rule in 2020, which was consistent with the statute and the common-law 

understanding of joint employment. Or, at the very least, the Board had discretion to tailor the 

Final Rule to ameliorate the harms on the hospital field. Indeed, the Board has long recognized 

that hospital labor relations present unique issues that require unique solutions. But by failing to 

reasonably consider that option in light of the AHA’s comments, the Board engaged in arbitrary 

and capricious action in violation of the Administrative Procedure Act. 

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ARGUMENT

To avoid arbitrary and capricious regulation, the APA “requires that agency action be 

reasonable and reasonably explained.” Clarke v. Commodity Futures Trading Comm’n, 74 F.4th 

627, 641 (5th Cir. 2023) (citation omitted). Under this standard, “a regulation is arbitrary and 

capricious if the agency ‘failed to consider an important aspect of the problem’ . . . includ[ing], of 

course, . . . the costs and benefits associated with the regulation.” Mexican Gulf Fishing Co. v. U.S. 

Dep’t of Comm., 60 F.4th 956, 973 (5th Cir. 2023) (quoting Motor Veh. Mfrs. Ass’n of U.S., Inc. v. 

State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)). And when an agency engages in noticeand-comment rulemaking, it must “respond to significant points and consider all relevant factors 

raised by the public comments.” Huawei Techs. USA, Inc. v. FCC, 2 F.4th 421, 449 (5th Cir. 2021) 

(cleaned up).

Here, the Board fell short of this standard by failing to meaningfully address the comments 

submitted by the American Hospital Association (as well as other commenters) during the noticeand-comment process. As explained below, the Final Rule imposes a unique burden on hospitals 

and creates unique challenges for the hospital field. The AHA detailed these concerns at length in 

its comment letter, but the Board did not appropriately address them. Among other things, the Final 

Rule (1) relied on a flawed interpretation of the NLRA; (2) completely failed to address the serious 

consequences that the Board’s new test would have in light of other interrelated federal health care 

laws; (3) sharply departed from longstanding regulatory history recognizing that the health care 

field should not be subject to one-size-fits-all labor rules; and (4) offered false consolidation that 

hospitals may not be subject to the Board’s novel rule, when in fact the rule appears to unyieldingly 

dictate otherwise. All of this—and more—was arbitrary and capricious. See Complaint, Dkt. 1, ¶¶ 

57, 58(e).

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I. The Final Rule Imposes Significant and Disproportionate Harm on Hospitals.

In its comment letter, the AHA explained four serious problems with the NLRB’s newly 

expanded “joint employer” test. All of these problems remain just as serious today, yet the Board 

failed to seriously consider them in the rulemaking process, much less alter the Final Rule in a way 

that would ameliorate them.

First, in the wake of the Covid-19 pandemic, many hospitals are financially struggling and 

heavily reliant on outside contractors to provide a wide variety of critical services. But the Final 

Rule threatens to impose massive new costs and regulatory complexity by reclassifying hospitals

as the “joint employers” of most, if not all, of these workers.

Second, to operate responsibly, hospitals must adopt various health and safety rules that 

apply to everyone who works in the hospital environment—including outside contractors. But the 

Final Rule treats these prudent safety rules as conclusive evidence that hospitals are the “joint 

employers” of outside contract workers, thus making it virtually impossible to rely on contract 

workers without having them deemed “joint employees.”

Third, by dramatically changing the classification of hospital workers, the Final Rule 

interferes with a host of carefully calibrated federal funding schemes and formulas that apply to 

hospitals that accept Medicare, Medicaid, and other federal funding. The Board was required to 

consider the resulting costs and complexity, but it did not. The Board completely ignored these 

reasonable concerns.

Fourth, the Final Rule’s one-size-fits-all approach to the joint-employer inquiry conflicts 

with the Board’s historical recognition that the unique labor issues in the health care field require 

tailored regulatory solutions. Traditionally, the Board has recognized this dynamic by allowing 

flexible labor solutions for hospitals. But not this time.

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A. The Final Rule Harms Hospitals Due to their Necessary Reliance on Contract Labor.

Hospitals are in the midst of a years-long financial crisis, facing spiraling cost increases 

and lagging revenue. As has been well-documented, the Covid-19 pandemic devastated hospital 

revenues. See Am. Hosp. Ass’n, Hospital and Health Systems Face Unprecedented Financial 

Pressures Due to COVID-19 at 1 (May 2020), available at https://tinyurl.com/4axprn3c. Even as 

the pandemic came to an official end, most hospitals ended the calendar year 2022 with an 

operating loss. See Am. Hosp. Ass’n, The Financial Stability of America’s Hospitals and Health 

Systems Is at Risk as the Costs of Caring Continue to Rise (“Costs of Caring”) at 2 (Apr. 2023), 

available at https://tinyurl.com/3zdehhzz. These financial struggles are impacting access to care. 

For example, more than 140 rural hospitals have been forced to close over the last 13 years. Costs 

of Caring at 2. 

Labor costs are a driving force in these financial difficulties. Lack of staff before, during, 

and after the pandemic increased competition for workers, which has driven labor costs higher. 

One analysis predicts a national shortage of over 500,000 registered nurses and 100,000 physicians 

by 2030. See Am. Consultants, Navigating Major Staffing Shortages in Healthcare (June 28, 

2019), available at https://tinyurl.com/mrykfavx. In the face of these labor shortages, hospitals 

have been forced to rely on contract labor and staffing agencies. See Syntellis & Am. Hosp. Ass’n, 

Hospital Vitals: Financial and Operational Trends: Workforce Pressures Take Their Toll in 2022, 

at 3 (Feb. 2023), available at https://tinyurl.com/27f9tbwj. As a result, labor expenses have skyrocketed. Hospitals have “had to use more contract labor while also paying exponentially more 

for the contract labor they used,” leading to a more than 250% increase in contract labor costs over 

the last three years alone. Id.

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In light of these facts, and as the AHA’s comment letter explained, the health care field will 

suffer unique and disproportionate harms from the Board’s adoption of an overbroad definition of 

joint employment. SeeAm. Hosp. Ass’n, Comments on the NLRB’s Notice of Proposed Rulemaking 

Re: the Standard for Determining Joint Employer Status (“Comment Letter”), at 2-3 (Nov. 2023), 

available at https://tinyurl.com/7khjh9sr. By dramatically broadening the category of joint 

employment, the Final Rule makes it more likely that outside contractors will be considered 

hospital “employees” with whom hospitals must bargain. Struggling hospitals will thus be dragged 

into unwieldy multi-lateral negotiations with many different contractors and those contractors’ 

employees, imposing massive complexity and regulatory compliance costs, as well as creating 

labor friction and potentially jeopardizing the contracting relationships. Put simply, the Final Rule

will divert scarce hospital resources towards compliance and away from helping patients.

B. The Final Rule Punishes Hospitals for Responsible Health and Safety Measures.

As a matter of both law and professional responsibility, hospitals have a duty to maintain

robust health and safety policies that protect their patients, visitors, and workers (including outside 

contractors) against the spread of disease and other harms. Under the Final Rule, however,

hospitals will be penalized for complying with the law and maintaining such beneficial policies. 

According to the Final Rule, a hospital will be deemed the “joint employer” of any worker, even 

one who is employed by an outside contractor, if the hospital has direct or indirect control

(regardless of whether that control is ever exercised) over that worker’s “[w]orking conditions 

related to the safety and health of employees.” 29 C.F.R. § 103.40(d)(7).

Under this provision, hospitals could be deemed the “joint employers” of almost every 

outside contract worker who performs any work in the hospital setting. The reason is simple: Given 

the nature of their operations, hospitals cannot operate unless they implement policies that are 

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“related to” the “safety and health” of everyone in the building. There are extensive laws and 

regulations that require hospitals to develop and maintain many different health and safety rules. 

And even aside from what is strictly required by law or regulation, hospitals have an ethical duty 

to maintain optimal health and safety policies on their premises. 

To take just one example of regulatory requirements that affect many contract workers in 

hospitals, federal law requires that “[a]ll licensed nurses who provide services in the hospital” must 

“adhere to the policies and procedures of the hospitals,” and the head of nursing at a hospital “must 

provide for the adequate supervision and evaluation of the clinical activities of all nursing 

personnel” working in the hospital. 42 C.F.R. § 482.23(b)(6). That supervision is extremely broad: 

hospital governing bodies “must ensure that the services performed under a contract are provided 

in a safe and effective manner.” Id. § 482.12(e)(1). Hospitals therefore need to control to some 

extent “[w]orking conditions related to the safety and health” of contract nurses and those nurses’ 

“manner, means, and methods of the performance of duties” to comply with these legal 

requirements. See 29 C.F.R. § 103.40(d). 

Nor are such federal requirements limited to nursing. Hospitals also must “develop and 

maintain a comprehensive emergency preparedness program” that meets certain non-exhaustive 

requirements and develop “strategies for addressing emergency events.” 42 C.F.R. § 482.15(a)(2).

They are also required to maintain “facilities, supplies, and equipment . . . to ensure an acceptable 

level of safety and quality.” Id. § 482.41(d)(2). And the list goes on and on.

As a result of regulatory requirements like these that inherently affect working conditions 

related to safety and health, it appears that hospitals have essentially no way to avoid becoming 

“joint employers” of all who work on their premises. For hospitals, then, it is a false promise for 

the Board to say that the Final Rule “permits business entities to evaluate and control their potential 

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status as joint employers, ex ante, based on their freely chosen contractual arrangements.” Final 

Rule, 88 Fed. Reg. 73946, 73961 (Oct. 27, 2023). In fact, given these and other federal regulations, 

hospitals and health systems will have no ostensible ability to structure their relationships to avoid 

the sweep of the Final Rule.

In its commentary accompanying the Final Rule, the Board blithely dismissed this problem 

by asserting that “contractual terms that do nothing more than incorporate regulatory requirements, 

without otherwise reserving authority to control or exercising power to control the performance of 

work” will not be considered evidence of joint-employer status. Id. at 73965–66. But there are two 

serious problems with this assertion. First, it has no foundation in the actual regulatory text, which 

assigns joint-employer status to all entities that possess authority to directly or indirectly control

“working conditions related to [worker] safety and health,” with no exception for hospitals that 

have no choice due to regulatory requirements. 29 C.F.R. § 103.40(d)(7).

Second, even if a “regulatory compliance” exception could somehow be read into the 

regulations, it still would offer little comfort for hospitals because they have professional and 

ethical obligations to protect the health and safety of workers beyond their strict legal obligations. 

In the Final Rule, the Board explained that “[t]o the extent that an employer reserves further 

authority or discretion over health and safety matters” beyond “choosing among alternative 

methods of satisfying its legal obligation[s],” the authority to set safety and health rules can result 

in a finding of joint employment. 88 Fed. Reg. at 73966 n.175. That is likely dispositive for 

hospitals and health systems. Federal and state laws do not strictly dictate every aspect of what 

hospitals must do on all kinds of safety and health policies—from security access controls, to handwashing rules, to hand-sanitizer availability, to glove and mask dispensing for visitors, to 

ventilation in rooms and hallways. Hospitals have both direct and indirect control over what 

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particularized “conditions” they want to adopt to comply with the complex backdrop of federal, 

state, and local laws. And of course these “conditions” are “related to” the “safety and health” of 

virtually all contract workers in the building. 

Under the Final Rule, then, virtually all contract employees who work at hospitals will still 

apparently be deemed part of a “joint employment” relationship with the hospital. This cannot be 

squared with the commonsense principle that the “joint employer” test must not be so broad that 

it sweeps in everyone based on mere “quotidian aspects of common-law third-party contract 

relationships,” thus collapsing the distinction between contractors and true employees. BrowningFerris Indus. of California, Inc. v. NLRB, 911 F.3d 1195, 1220 (D.C. Cir. 2018).

C. The Final Rule Has a Dramatic Impact on Federal Funding Schemes.

The Board also failed to consider how its radical expansion of the “joint employer” concept 

would affect other federal health care regulations. See Comment Letter at 3–5. Needless to say, 

hospitals are heavily regulated. “Almost every aspect of the field is overseen by one regulatory 

body or another, and sometimes by several.” Robert I. Field, Why Is Health Care Regulation So 

Complex?, 33 Pharmacy & Therapeutics 607, 607 (Oct. 2006), https://tinyurl.com/26bfknp8. By 

one count, 130,000 pages of rules govern health care providers, with Medicare rules comprising 

over 100,000 of those pages. Victor E. Schwartz & Phil Goldberg, Carrots and Sticks: Placing 

Rewards As Well As Punishment in Regulatory and Tort Law, 51 Harv. J. Legis. 315, 350 (2014). 

By recategorizing hospitals’ contract workers as employees, the Final Rule may cause significant 

changes in the outputs of these complex regulations.

As the AHA outlined in its comment letter, reclassifying hospital contractors as employers 

would have an impact on complicated aspects of government reimbursement formulae. It would 

change the Medicare wage index, “an important factor used in Medicare hospital payments to 

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account for geographic differences in hospital wage levels” governed by “strict rules that dictate 

which components [of hospital labor costs including contractor and employee costs] can be 

allocated for Medicare reimbursement purposes.” Comment Letter at 4. The Final Rule also would 

affect the “labor-related share,” a metric of “the proportion of hospital payments [that are] affected 

by wages” and related costs. Id. Small changes to this metric caused by transforming the labor-law

status of health care contractors could have a large impact on Medicare reimbursements because 

it affects the base rate for reimbursement on which all other factors build. Id. Yet another metric 

that the Final Rule will affect is the “cost-to-charge ratio,” a measure of how much each patient 

costs, which has an impact on, among other reimbursement inputs, the “Medicare Severity 

Diagnosis Related Groups weights,” which are metrics that support Medicare inpatient 

reimbursement, especially for high-cost patients. Id. at 4–5. 

The Board ignored these comments. Its response was simply that because it “discuss[ed]” 

the concerns of hospitals at a general level, it “disagree[d] with” the AHA’s view that the Board 

has not sufficiently considered hospital-specific issues. 88 Fed. Reg. at 73960. But that 

“conclusory, unsupported” assertion gives no reason to believe that the Board actually considered 

these complicated issues, consulted with the other federal agencies about how the Board’s rule 

would intersect with other federal health care laws, or contemplated tailoring its Rule in a way that 

could avoid the problem. Wages & White Lion Invs., L.L.C. v. U.S. Food & Drug Admin., 16 F.4th 

1130, 1137 (5th Cir. 2021). The Board’s explanation is “thus wholly insufficient.” Id. It was 

arbitrary and capricious for the Board to ignore these important considerations. See id. at 1138; 

Texas v. Biden, 10 F. 4th 538, 555–56 (5th Cir. 2021) (“The Government repeatedly argues that 

DHS’s statement that it considered this or that factor is enough to avoid any arbitrary-andCase 6:23-cv-00553-JCB Document 27 Filed 11/20/23 Page 15 of 23 PageID #: 496
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capricious problems.... The law says otherwise. ‘Stating that a factor was considered ... is not a

substitute for considering it.” (internal citation omitted)).

D. The Final Rule Fails to Recognize the Unique Labor Issues Faced by Hospitals.

The Board’s Rule also is arbitrary and capricious because it inexplicably departs from the 

Board’s longstanding practice of respecting the unique considerations that inform labor regulation 

in the health care field. As the AHA explained in its comment letter, the “NLRB has consistently 

tailored the application of Board law and precedent to hospitals.” Comment Letter at 5. But here, 

the Board all but ignored that history and insisted on applying the Final Rule in a one-size-fits-all 

fashion, without adequately explaining why it rejected the AHA’s request for a more specific 

regulatory solution that would be sensitive to the well-established needs of the hospital field.

In 1974, Congress amended the NLRA so that it covered non-profit hospitals. See Act of 

July 26, 1974, Pub. L. No. 93-360, 88 Stat. 395. But from the outset, Congress, the Board, and the 

courts all agreed that the unique characteristics of hospitals warranted different treatment than 

other employers in the context of labor relations. As the Board recognized early on, “the primary 

function of a hospital is patient care,” and “carrying out that function” requires hospitals to follow 

certain labor practices that “may be justified” even if they would not be permissible for other 

employers. St. John’s Hospital & Sch. of Nursing, 222 NLRB 1150 (1976); see also, e.g., NLRB v. 

Baptist Hosp., Inc., 442 U.S. 773, 783 n.12 (1979) (allowing special limits on union solicitation 

and distribution in hospitals due to “the importance of maintaining a peaceful and relaxed 

atmosphere” for patients). These decisions reflected Congress’s judgment “that the needs of 

patients health care institutions required special consideration in the Act,” Laborers Int’l Union of 

N.A. Local Union No. 1057 v. NLRB, 567 F.2d 1006, 1010 (D.C. Cir. 1977).

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Following that principle, in 1989, the Board used its rulemaking authority to set 

standardized bargaining units in the health care field, in order to heed “Congress’s admonition 

against proliferation of health care bargaining units.” Collective-Bargaining Units in the Health 

Care Industry, 52 Fed. Reg. 25142, 25146 (July 2, 1987). Under those rules, which still exist today, 

the Board “limited the possible units in the various types of establishments to a reasonable, finite 

number of congenial groups displaying both a community of interests within themselves and a 

disparity of interests from other groups.” Id. 

In promulgating the Final Rule here, however, the Board decided to ignore that 

congressional “admonition” without any serious explanation. As explained above, the Final Rule 

provides that hospitals will be treated as the joint employers of—and thus required to bargain 

with—all contract staff with respect to “any term and condition of employment that [they] 

possess[] the authority to control,” either directly or indirectly. 29 C.F.R. § 103.40(h)(1). This

means that if a hospital has a bargaining unit of employee nurses, but also engages a staffing 

agency to provide “travel nurses” on a contract basis, the travel nurses will likely be deemed part 

of a “joint employment” relationship that could require bargaining with the hospital. The 

bargaining will have to be multi-lateral because it will need to include the contract nurses, the

staffing agency, and the hospitals, all with unaligned interests. It will become even more complex 

because hospitals often use multiple outside staffing agencies even for one particular field of 

expertise such as nursing. And then this multiplicity of additional bargaining units will be repeated 

across all of the different work areas where hospitals use contract labor. 

This is exactly the type of “proliferation” of bargaining units that the Board has said in 

previous rulemakings Congress directed the agency to avoid. 52 Fed. Reg. at 25146. Accordingly, 

the Board’s contradiction of its previous regulatory approach on this score is a classic type of 

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arbitrary and capricious action. E.g., Univ. of Tex. M.D. Anderson Cancer Ctr. v. United States, 985 

F.3d 472, 479–80 (5th Cir. 2021) (“[A]gency action is arbitrary and capricious when it fails to 

supply a reasoned analysis for any departure from other agency decisions.” (cleaned up)). And to 

make matters worse, the Board’s response to the AHA’s comments on this issue is wholly 

inadequate. In the Final Rule, the Board “acknowledge[d]” these concerns, 88 Fed. Reg. at 73960, 

but it did not reasonably explain why they did not justify a narrower approach that would avoid 

the proliferation of bargaining units. The Board relied on its blanket assertion that it had no power 

to devise a hospital-specific solution, id. at 73960, but, as discussed above, that is inconsistent with 

the Board’s four-plus decades history of recognizing hospitals’ unique status.

II. The NLRA Did Not Require the Board to Ignore the AHA’s Concerns.

In response to the AHA’s comments—and the mountain of other criticism of its proposed 

rule—the Board relied on one refrain over and over again: we have no choice. Instead of grappling 

with the comments and responding to them in a reasonable manner, the Board stated that the 

comments were “misdirected” because “the Act itself” supposedly “requires the Board to conform 

to” the sweeping “joint employer” test embodied in the Final Rule. 88 Fed. Reg. at 73978. In 

response to concerns about basing the joint-employment test on mere indirect and unexercised

control, the Board asserted that it did not have “statutory authority to require a showing of actual 

exercise of direct and immediate control.” Id. at 73951. Thus, the Board opined that the “concerns” 

expressed by the AHA and others did not “reflect considerations that, as a statutory matter, may 

determine the Board’s choice” of policy. Id. 

The Board is wrong for several reasons. For starters, it is highly implausible that the Final 

Rule’s novel “joint employer” test is strictly mandated by the NLRA given that nobody thought it 

applied during the first nine decades after the statute was enacted. See generally Plaintiffs’ Motion 

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for Summary Judgment, Dkt. 10, at 18–27. But even if the Final Rule did reflect a permissible 

reading of the common-law concept of joint employment, it certainly does not reflect the only 

possible reading. At the very least, the common law tradition embodied in the NLRA can 

reasonably be understood to allow a far narrower test for “joint employer” status, as laid out in the 

Board’s own previous rule promulgated in 2020 on the same subject. See 29 C.F.R. § 103.40 

(2022). Because that rule itself reflects a reasonable reading of the NLRA and the common-law 

background of joint employment, the Board certainly had the option of adhering to that rule, which 

means that it needed to consider all of the comments submitted by the AHA and others identifying 

problems that would result from the Board’s new approach reflected in the 2023 Final Rule.

Although the Board “must color within the common-law lines identified by the judiciary,” 

it is not required to regulate to the maximum extent allowed by the common law. BFI, 911 F.3d at 

1208. As Member Kaplan explained in his dissent from the Final Rule, “while it is clear that the 

Board is precluded from adopting a more expansive joint-employer doctrine than the common law 

permits, it may adopt a narrower standard that promotes the Act’s policies.” 88 Fed. Reg. at 73988.

The Board has exercised this discretion in the past. For example, the Board specifically 

declined to exercise the statutory maximum of its authority because of concerns about protecting 

patient care in the hospital field. See St. John’s Hospital & Sch. of Nursing, 222 NLRB 1150. Here, 

the Board could have relied on the same reasoning to avoid the hospital-specific problems 

identified in the AHA’s comment letter. Its failure to even consider that option was arbitrary and 

capricious. See also Dep’t of Homeland Sec. v. Regents of the Univ. of Cal., 140 S. Ct. 1891, 1910–

11 (2020) (holding agency action arbitrary and capricious when it “did not appear to appreciate 

the full scope of [its] discretion”); see generally Compl. ¶¶ 55-58.

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Moreover, as the Board majority itself acknowledged, it was under no obligation to proceed 

by rulemaking at all to create a universally applicable joint-employer definition; it could have 

proceeded case by case through adjudication, as it always did up until 2020. See 88 Fed. Reg. at 

73956 (citing NLRB v. Bell Aerospace Co., 416 U.S. 267, 294 (1974) (“[T]he choice between 

rulemaking and adjudication lies in the first instance within the Board’s discretion.”)). Or, if it was 

going to create a general rule, it could have refrained from applying that general rule to the hospital 

field, which it could have reserved for a later rulemaking that would take into account the unique 

labor issues and specific problems confronting hospitals. As the Supreme Court has recognized, 

“nothing prohibits federal agencies from moving in an incremental manner.” FCC v. Fox 

Television Stations, Inc., 556 U.S. 502, 522 (2009); Mobil Oil Exploration & Producing Se. Inc. 

v. United Distribution Cos., 498 U.S. 211, 231 (1991) (“[A]n agency need not solve every problem 

before it in the same proceeding.”).

The Board cannot excuse its failure to respond to the AHA’s comments by relying on its 

statement that “we would not choose to [adopt a narrower rule], as a matter of policy, in any case.” 

88 Fed. Reg. at 73951; see also id. at 73948 n.14 (“[T]he final rule reflects our policy choices, 

within the bounds of the common law . . . .”). Such a bare assertion does not even begin to fulfill 

the Board’s duty to actually “respond to significant points and consider all relevant factors raised 

by the public comments.” Huawei, 2 F.4th at 449 (cleaned up). “Nodding to concerns raised by 

commenters only to dismiss them in a conclusory manner is not a hallmark of reasoned 

decisionmaking.” Gresham v. Azar, 950 F.3d 93, 103 (D.C. Cir. 2020). In short, the Board must 

explain its policy choices in light of the public comments presented. It cannot simply assert that 

the Final Rule reflects its policy discretion. 

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Nor can the Board rely on its conclusory assurance that the Final Rule will not create undue 

problems for hospitals because the Board in future adjudications will “consider all relevant 

evidence regarding the surrounding context.” 88 Fed. Reg. at 73960 & n.100. That reassurance 

rings hollow given the Final Rule’s text, which again provides that, if a hospital has the “authority 

to control . . . [w]orking conditions related to the safety and health of” a contractor’s employees, 

even minimally, then that alone “is sufficient to establish status as a joint employer” and trigger 

bargaining requirements. 29 C.F.R. § 103.40(c), (d)(7), (e)(1). Having announced that unyielding 

test, the Board unlawfully failed to explain how considering “all relevant evidence regarding” 

might somehow avoid the sweeping reclassification of hospital contract workers as “employees.”

Finally, the Board’s cryptic explanation for why hospitals should not worry about this new 

test itself proves that the Final Rule is arbitrary and capricious. “[A]n agency’s decision is arbitrary 

and capricious if illogical on its own terms.” Sw. Elec. Power Co. v. EPA, 920 F.3d 999, 1021 (5th 

Cir. 2019) (cleaned up). That is exactly the situation here. The Rule either does not mean what it 

says and it somehow would allow hospitals to avoid becoming joint employers of their contract 

staff, or else the Board’s “all-relevant-evidence” response relies on a misunderstanding of how its 

own Rule will actually work. The result is the same either way: the Rule must be set aside. See 

Chamber of Comm. of U.S. v. U.S. SEC, 85 F.4th 760, at *11 (5th Cir. 2023) (rejecting a 

justification of agency policy because it was “internally contradictory”).

In short, if the Board was not willing to provide more than cursory responses and false 

assurances to the AHA’s concerns about the hospital field, it should not have swept up this massive 

and important part of the national economy into the Final Rule. Its decision to go ahead and do so 

without adequate explanation cannot be reconciled with the APA’s requirement of reasoned and 

deliberative decision-making. 

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CONCLUSION

For the reasons above, the Court should grant Plaintiffs’ motion for summary judgment, 

set aside the Joint Employer Rule, and enjoin its application. 

Date: November 20, 2023 Respectfully submitted,

/s/ Joanne Bush 

Joanne R. Bush

Texas Bar No. 24064983 

JONES DAY

717 Texas, Suite 3300 

Houston, Texas 77002 

Phone: (832) 239-3782 

Fax: (832) 239-3600 

Email: jrbush@jonesday.com 

Anthony J. Dick 

D.C. Bar No. 1015585 

William J. Strench

D.C. Bar No. 1781271 

JONES DAY

51 Louisiana Ave. NW 

Washington, DC 20001 

Phone: (202) 879-3939 

Fax: (202) 626-1700 

Email: ajdick@jonesday.com 

Counsel to Amicus Curiae 

American Hospital Association

 

Case 6:23-cv-00553-JCB Document 27 Filed 11/20/23 Page 22 of 23 PageID #: 503
CERTIFICATE OF SERVICE

The undersigned certifies that on November 20, 2023, the foregoing document was 

electronically submitted with the clerk of the court for the United States District Court, Eastern 

District of Texas, using the electronic case file system of the court. I hereby certify that I have 

served all counsel of record electronically or by another manner authorized by Federal Rule of 

Civil Procedure 5(b)(2).

 

 /s/ Joanne Bush

Case 6:23-cv-00553-JCB Document 27 Filed 11/20/23 Page 23 of 23 PageID #: 504