March 26, 2019

March 26, 2019

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March 25, 2019

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Uncertainty Remains As DC Circuit Weighs In On NLRA Joint Employer Standard (US)

Much attention over the past few years has been given to the ongoing saga concerning the standard applied by National Labor Relations Board (“NLRB” or “Board”) to determine when two unrelated business entities share sufficient control over a group of employees such that they may be deemed “joint employers” under the National Labor Relations Act (“NLRA”) – and therefore jointly liable for obligations and liabilities under that statute.  Going back to 2015, in Browning-Ferris Industries, the NLRB departed from precedent established more than 30 years ago to define a new joint employer standard, the effect of which was to broaden the circumstances under which entities could be held joint employers under the NLRA, expanding that definition to include those entities that possess only indirect control over terms and conditions of employment, and those that reserve the right to control the terms and conditions of the subject employees’ employment (even if not actually exercised).  Following this decision, deep concern arose in the business community, in particular, in the temporary/contract labor and franchise industries, regarding the impact of this expanded joint employer standard, wherein indirect and even unexercised control, could result in a joint employer finding, and with it, joint liability.

Fast forward to 2017.  Following the transition to the new Presidential administration, a new slate of NLRB Members undid the Browning-Ferris decision and established a new (but some would say return to the old) standard in Hy-brand Industrial Contractors, which (re)narrowed the joint employer standard to limit such status to those entities with “significant direct” control over the subject employees.  However, as we reported here, shortly after issuing the Hy-Brand decision, the Board set it aside and expressly reinstated the Browning-Ferris test amidst controversy involving a potential conflict of interest by one of the Board Members involved in the Hy-Brand decision.

Moving right along, in September 2018, the Board announced its next move on the joint employer standard: undertaking a formal rule-making process to adopt a new Board rule defining the joint employer standard in which, similar to that expressed in Hy-Brand, entities must “possess and actually exercise substantial direct and immediate control over the essential terms and conditions of employment in a manner that is not limited and routine.”  The Board has requested public comment on this proposed rule, which may be submitted on or before January 13, 2019.

Meanwhile, Browning Ferris, the employer that was the subject of the Board’s 2015 Browning-Ferris decision which the Board determined was a joint employer of individuals otherwise employed by a third-party labor supplier, petitioned the United States Court of Appeals for the District of Columbia to review the Board’s 2015 decision.  The Board, on the other hand, moved for enforcement of its 2015 order and to uphold the joint employer standard stated therein.

On December 28, 2018, the DC Circuit issued its opinion.  In it, the court largely sided with the NLRB and approved of its formulation of the joint employer standard stated in Browning Ferris.  The court concluded that the Board did not err when it concluded that authorized but reserved control, as well as an entity’s indirect control over the essential terms and conditions of the subject employees’ employment, are appropriate factors to consider in determining whether entities are joint employers.  The court did specifically point out however that it was not determining whether “reserved right to control, divorced from any actual exercise of that authority, could alone establish a joint employer relationship,” since this question was not presented in the case because the Board had presented evidence of actually exercised control in addition to evidence of reserved authority.

However, on the factor of indirect control, the court found that the Board had failed to confine its consideration of indirect control to the “essential terms and conditions of employment” because it included evidence of “routine components of a company-to-company contract,” such as the types and numbers of workers needed to perform the work at Browning-Ferris.  The court accordingly remanded the case back to the Board for it to define the parameters of indirect control and then apply only those facts that fall within the stated (and presumably appropriate) parameters to reexamine whether Browning-Ferris was a joint employer of the subject employees.

The court further took issue with the Board’s stated “second part” of the Browning-Ferris test, which requires joint employers to “possess sufficient control over employees’ essential terms and conditions to permit meaningful collective bargaining,” and accordingly ordered the Board to define “meaningful collective bargaining,” and which terms and conditions are essential to allow such bargaining to occur.

With its determination that indirect control and the right to control are both factors squarely within the common law definition of a joint employer, the court, perhaps not so subtly, cast serious doubt on the appropriateness of the NLRB’s recently-proposed rule that would require substantial direct control to find a joint employer relationship, cautioning that the “Board’s [future] rulemaking [] must color within the common-law lines identified by the judiciary.”

Based upon the questions remaining after the DC Circuit’s Browning-Ferris decision, and in light of the pending rule-making process, the joint employer standard remains in flux, leaving employers without a definitive guidepost in the meantime.  Further, while the court did not expressly authorize retroactive application of the redefined Browning-Ferris standard, it did state that a new definition could be considered an expression of an old rule, which would allow it to be applied retroactively.  It remains to be seen whether the Board, tasked with refining the Browning-Ferris rule, will stay true to the initial intent behind the standard, or will attempt to align it with the pending new proposed rule, by defining a test for “indirect control” that essentially renders it meaningless.  We will keep you updated as this issue progresses.

© Copyright 2019 Squire Patton Boggs (US) LLP

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About this Author

Daniel B. Pasternak, Squire Patton Boggs, Phoenix, Labor Litigation Layer
Partner

Dan Pasternak focuses his practice on litigating labor and employment claims, representing management in traditional labor relations matters, and working with employers to develop and enforce business-sensible policies and practices to effectively manage their human resources.

Dan represents employers before federal and state courts and administrative agencies, and in arbitration and mediation proceedings, in employment matters arising under the array of federal and state employment laws, including discrimination, harassment, retaliation,...

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