Over the holidays the District of Columbia (DC) Appeals Court held that although the National Labor Relations Board (NLRB) may determine joint employer status, its test in the Browning-Ferris decision handed down in 2015 did not do the job properly. The original Browning-Ferris decision handed down by the NLRB held that even “when two entities never have exercised joint control over essential employment terms, and given when any such joint control is not ‘direct and immediate’ they still will be joint employers based upon the existence of unexercised ‘reserved’ joint control or ‘indirect’ control, including control that is ‘limited and routine.’”
The recent DC Appeal Court’s review of Browning-Ferris held the NLRB could consider the issues of indirect control and unexercised reserved control as joint employer factors, but the test used by the NLRB back in 2015 “failed to adequately distinguish between indirect control over employment terms and influence or control over ‘routine’ matters related to the formation and maintenance of contractor arrangements.”
The NLRB’s original Browning-Ferris ruling has shaken world of employment labor. The laws around business relationships such as user-supplier, parent-subsidiary, contractor-subcontractor, franchisor-franchisee, predecessor-successor, creditor-debtor, and even contractor-consumer all were threatened by the Browning-Ferris rule that essentially wiped out those contractual relationships and business separations.
The old rule held such “joint” relationships precluded a lot of legal responsibility between the two entities. The NLRB’s Browning-Ferris decision muddied those legal waters considerably by putting more legal responsibility onto the “parent” or “the party of the first part” of that relationship than had originally existed if that party had reserved rights of control in any or some fashion, Since the Browning-Ferris decision, employers, contractors, suppliers, franchisors, and the others have all found themselves in an uncomfortable position of possible legal responsibility where they thought they had contractually removed from themselves and put or kept with the “party of the second part.”
The DC Appeals Court decision on remand to the NLRB requested additional clarification as to “what should be the scope of indirect-control element’s operation?” The Court asked the NLRB to further articulate why Browning-Ferris became a joint employer with Leadpoint, its staffing contractor. The DC Court of Appeals found the NLRB had in fact ruled so broadly it had “veered out beyond the orbit of common law.” Quite a reach of authority for a regulatory agency that has historically had a narrower mission, that of labor relations – not influencing the much broader areas of contract law.
Since 2016, the NLRB has been working on new regulations to support a narrower scope of interpretation of joint-employer status. It published its proposed rules in September of 2018 even as this case was pending. Did the NLRB get sandbagged by the Court of Appeals ruling thinking that the Court was going to simply overrule Browning-Ferris completely thereby allowing the NLRB to tailor its new rules comfortably within the Trump NLRB’s narrower definition of joint employment?
Down the Rabbit Hole of NLRB Logic
Todd Lebowitz, a labor attorney with Baker Hostetler LLP, states that was why the NLRB originally petitioned the Appeals Court for a decision ahead of its rulemaking back mid-year 2018. However, with the Appeals Court decision, Lebowitz opines that the NLRB’s plan may have backfired.
Lebowitz further writes the Court of Appeals recognized that the NLRB followed the common law test for “agency,” which it had the right to do. However, the DC Appeals Court stated the NLRB did not have the right to re-define the definitions of joint employment in a way that is inconsistent with the meaning of “agency” under contract law. This is where the NLRB now has to clarify and realign itself with conventional law. The Court stated that indirect and reserved control issues must be considered in determining joint-employment. Where the NLRB appears to have overstepped, and has to be careful not to do so again with its new rules, is its attempt to prohibit the consideration of what indirect and reserved control was under joint employment. This point, Lebowitz again opines “would cast doubt on the Board’s ability to implement its proposed new regulation. The regulation would require a showing of direct and immediate control (not merely indirect or reserved control) before joint employment could be found.”
Lebowitz states where the original Browning-Ferris decision on joint employment status “went wrong was in allowing the NLRB to consider indirect or reserved control over non-essential terms and conditions of employment. The common law test for an agency relationship requires control over essential terms and conditions of employment. Essential terms generally defined as hiring, firing, and disciplining.
So now the NLRB takes another look at its Browning-Ferris decision while also re-contemplating its pending rules on joint employment.
Sources: Seyfarth Shaw One Minute Memo. D.C. Circuit Invalidates NLRB’s Browning-Ferris Joint Employer Test 12/31/2018. D.C. Circuit upholds Browning-Ferris joint-employer test, mostly — FEDERAL NEWS,Who Is My Employee blog Todd Lebowitz Baker Hostetler LLP Backfired? New Ruling May Threaten NLRB’s Proposed Rule on Joint Employment 1/2/2019