It has seemed at least to people that track labor issues that the National Labor Relations Board (NLRB) has been on quite a roll favoring unions across the United States. The NLRB with its Democrat appointed Board majority and its very pro-labor agenda is working diligently to change interpretation of the National Labor Relations Act (NLRA) at every turn, including the major issue of joint employment status.
Joint employment is where workers either on contract through a third party (staffing companies) or working for legally established franchise companies are also seen as the legal responsibility of the client company or the Franchisor.
Last week the Third Circuit Court of Appeals, also known as the DC Circuit, held that Browning-Ferris was not treated fairly by the NLRB. Under a previous ruling by the same Court in a 2018, the Court found it was a joint employer and its contract workers were in turn its employees too. The previous Court found that Browning-Ferris had “reserved and indirect control” over the contract employees and therefore was also their employer.
The decision handed down last week found that the NRLB unfairly used a revised test (that the Obama administration had formulated) for joint employment. In this decision, the current Court found that they should have recognized the previous Court’s decision and should have applied the historical joint employment test to that case that used “direct control” over workers as the measure for whether joint employment existed at the time. This was determined improper for this case.
What does that all mean? Browning-Ferris has been in the middle of the NLRB’s, current and past Executive Branch Administration’s, the NLRB, and the Court’s battle over what is the proper test for joint employment. Under the “historical” rule, joint employment was dependent upon which employer exercised direct control over the workers. The historical test was arguably more balanced and respected an employment relationship where a third-party contractor employed and exercised reasonable control over the workers regardless of where they were working. The Obama test implemented by regulation and subsequently dumped by the Trump Administration found the employment relationship exists whenever a modicum of control is exercised by the contracting employer or even the Franchisor where the Franchisee had to follow the parent company’s policies around employment and the franchise operation.
Confusing, yes, but the implications for employer and worker in either a vendor-contractor or franchisor- franchisee relations potentially throw a lot of legal liability thrust all the employers engaging those workers.
One major issue involved as far as federal agencies such as the NLRB are concerned is whether that agency or any other government departments (Department of Labor) should have authority to change its mind because of the position of the sitting President (Executive Branch). The Third Circuit opinion last week stated that its decision was not about that and the essential principle that an agency such as the NLRB could change its policy was not what was being decided upon.
So, what was this small victory for employers about? The Court held this ruling was about how the Browning-Ferris was ruled against due to Executive Branch Administration (and the NLRB) changing its joint employer test criteria and why it was doing so. The Court’s 2015 decision that was partially vacated in a subsequent decision (2018) by the same DC Circuit was incorrectly done in order to make way for a new joint employer test (Obama test).
The Third Circuit Court held the NLRB’s case must stay consistent with the Court’s common law agency test. The NLRB needs to come up with a test with “reserved and indirect control” as part of the joint employment analysis.
The Biden Administration is currently re-working the NLRB’s position on joint employment along with DOL joint employment regulations that would apply to other government regulatory bodies. So, although this decision is a small victory for Browning-Ferris and its long battle to be treated as other employers that contract outside workers in its operations are, the big issue of when outside contract workers are also employees of the client, will continue to be challenged.
One of the Biden Administration’s major policy goals is to considerably narrow, or if possible, eliminate most contract workers. The current Administration’s big goal is to have employers engaging workers outside a standard employment relationship to be jointly responsible for any workers on-site and to ultimately challenge the “Gig” economy that allows people to work for themselves. One important policy accomplishment from this Administration’s standpoint as well as the pro-labor NLRB, would be if they can do that, they can create a better union organizing environment for Big Labor as well as make it easier for the government to collect employment taxes from employers.
What should be done now?
Employers should be reviewing their staffing relationship contracts to ensure it clearly states the vendor is the employer and the client is not the employer. Further if the employer has workers that are classified as contractors, there should be an agreement clearly stating the vendor-contractor relationship. Make sure that any contract workers who are not employed by another company have their own federal ID number and agree they are an independent contractor responsible for their taxes (Unemployment and Workers’ Compensation insurance).
As with many employment and labor legal challenges these days, stay tuned. Much more to come.
Source: Law 360 DC Circuit Knocks NLRB. Orders 3rd Crack At Browning Ferris (7/29/2022) Employment Law Spotlight. Baker Nostetler. Not Your Godfather’s Smackdown: Joint Employer Test Must Consider “Reserved or Indirect Control,” D.C Circuit Rules