On December 28, the majority of a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit for the most part upheld an expansive “joint employment” standard adopted by the National Labor Relations Board during the Obama Administration. But the panel’s 2-1 decision has arguably made murky waters even murkier.
The background of the joint employment issue is long and convoluted. Before 2015, the NLRB had said that an entity was not a “joint employer” of another entity’s workers for purposes of the National Labor Relations Act unless, at a minimum, it exercised “direct and immediate control” over the other entity’s workers.
That changed in 2015. In Browning-Ferris Industries, the Board voted 3-2 along party lines to adopt a new standard, deciding that an entity was a joint employer if it had indirect or potential (“reserved”) control over the other entity’s employees, even if the control was not exercised. The new standard means that more entities are “employers” subject to Board power. More “employers” means more targets for effective union organizing, leveraging union bargaining power, and increasing the scope of unfair labor practice responsibility and liability. Status as an “employer” can make the entity a lawful target of various types of picketing, boycotts, or other protected concerted activity that would not be lawful if it were “secondary” activity directed at a third party that is a neutral in the labor dispute.
In late 2017, after it returned to a Republican majority, the Board overruled Browning-Ferris in Hy-Brand Industrial Contractors, but the action was short-lived: The Inspector General of the NLRB found that Board Member William Emanuel should have recused himself because his former law firm had represented one of the parties to the Browning-Ferris case. As a result of the Inspector General’s ruling, the Board vacated Hy-Brand, putting Browning-Ferris back in place.
In the late spring of 2018, NLRB Chairman John Ring announced that the Board would issue regulations addressing the “joint employer” issue. The proposed regulations, issued in September, would restore the pre-2015 standard, which required that the entity exercise “direct and immediate control” over the other entity’s workers before it would be considered a joint employer. (The comment period on the proposed regulations has been extended several times. Comments are currently due January 14, and replies to comments are due January 22.)
While all of this was taking place, Browning-Ferris Industries of California, Inc., was seeking court review of the 2015 Board decision, resulting in the D.C. Circuit decision issued last week.
The D.C. Circuit decision
The panel majority, in an opinion written by Judge Patricia A. Millett and joined by Judge Robert L. Wilkins, held that because the NLRA does not define “employer,” the common law of agency controls who is a joint employer. Under the common law, Judge Millett said, unexercised reserved control and indirect control are relevant to the joint employer inquiry, and the Board can weigh those factors as it wants. Thus, to an extent, the 2015 Board decision was proper.
However, the panel majority also found that the 2015 Board had failed to distinguish between indirect control over essential terms and conditions of employment – which is relevant to the joint employer inquiry – and indirect control over routine matters related to contracting, which is not. According to the majority opinion, the Board needed to distinguish between types of indirect control that affect employees’ “essential terms and conditions of employment,” in contrast to those that are “intrinsic to ordinary third-party contracting relationships between companies.” Thus, the majority remanded the case to the NLRB, directing it to make the proper application of the relevant factors.
Unfortunately for employers, labor unions, and labor practitioners, the majority did not decide whether unexercised reserved or indirect control – standing alone – would be enough for a finding of joint employer status. Judge A. Raymond Randolph, dissenting, argued that the majority opinion was both “confused and confusing,” at least in part because it did not address this critical issue.
Judge Randolph also argued that the court should have sent the case back to the NLRB to allow the current Board to complete its rulemaking process related to the joint employment issue. Finally, he argued that the majority opinion misinterpreted the common law of agency.
The D.C. Circuit decision can be read to restrict the Board’s ability, either through case adjudication or rulemaking, to restore the prior standard for finding that an entity is a joint employer for NLRA purposes. The majority seems to be saying that the Board must follow the common law of agency, which (according to the majority) could result in a joint employer situation when the entity had unexercised reserved or indirect control over the employees of another entity. The court’s decision may provide more ammunition to those who disagree with the current Board’s proposed interpretation.
Next steps may include a request from either the Board or Browning-Ferris for en banc review by all of the D.C. Circuit judges. In the alternative, or after an en banc decision, the unsuccessful party could request review by the U.S. Supreme Court. In the meantime, the Board is likely to press forward with its joint employment rulemaking.
Legislative action is unlikely while Congress is divided.
Status as a “joint employer” can arise under the NLRA in various contract and ownership situations, potentially including contracting-out of operations, employee leasing, staffing agencies and their clients, parent corporations and subsidiaries, joint ventures, franchising, subcontracting, licensing, creditor-debtor, and trustee in control relationships. Any company in one of these relationships may find itself caught up in the “joint employment” jumble at some point. We will continue to follow this issue and will provide updates as developments occur.