Tuesday, September 6, 2022: Everything Old is New Again: NLRB Proposes Familiar-Looking Rule to Determine Joint Employer Status
The Return of the Obama Era “Indirect,” or “Reserved control” Test Is Sufficient to Prove Up Joint Employer Status
Signaling the start of yet another round in this continuing multi-decade fight, the National Labor Relations Board (“NLRB”) on Tuesday issued a Notice of Proposed Rulemaking in the Federal Register regarding when one company qualifies as a “joint employer” with another company(ies) pursuant to the National Labor Relations Act (“NLRA”). The NLRB seeks public comment on its Proposed Rule that a business is a joint employer of particular employees “if the employer has an employment relationship with those employees under established common-law agency principles and the employer shares or codetermines those matters governing at least one of the employees’ essential terms and conditions of employment.” The NLRB must receive your Comment on or before November 21, 2022.
If the proposed rule seems familiar to our readers, it is because we should all be familiar by now with the recent tortured history related to the question of who qualifies as a “joint employer” pursuant to the NLRA. The constant upheaval pertaining to this Rule has now spanned the most recent three presidential administrations. We were torn over possible alternative headlines;
Back To the Future: What is Old Is New
Its Déjà Vu All Over Again
Say What? Another Political Flip-Flop NLRB Decision?
Two Political Parties Interpreting the Very Same Congressional Statutory Language Really Came for The Fourth Time to Diametrically Opposite Interpretations?
We Don’t Need Lawyers: Just Tell Me Which Political Party is In Power and My Crystal Ball Can Predict Any NLRB Decision
Running In Circles and Getting Nowhere but Dizzy
Where We Are Now, Or At Least For the Moment: The New Proposed Rule, Same as the Old Rule
With the advent of a Democrat-led Executive Branch beginning in January 2021, the NLRB soon thereafter once again boasted a 3-2 voting block of Democrat Board Members. As a result, the NLRB has now issued the Proposed Rule referenced above seeking to overturn the Trump NLRB’s 2020 Final Rule. The Trump NLRB Rule currently requires an employer to have “direct and immediate control” to be a “joint employer” pursuant to the NLRA. Specifically, the NLRB proposes, instead, that “indirect control” or what is oftentimes called (contractually) “reserved control” alone is sufficient to prove “joint employer” status. In other words, welcome back to the Browning-Ferris Rule for Joint Employer status!
However, the NLRB’s Proposed Rule does make one change to the Browning-Ferris standard (from the Obama NLRB, discussed below) in a nod to the D.C. Circuit Court of Appeals decision in 2018: it defines the “essential terms and conditions of employment” as generally including, but not limited to, “wages, benefits, and other compensation; hours of work and scheduling; hiring and discharge; discipline; workplace health and safety; supervision; assignment; and work rules and directions governing the manner, means, or methods of work performance.” The proposed language is meant to address the D.C. Circuit’s admonition in 2018 that the 2015 Browning-Ferris holding was overbroad as to what factors were directly related to the terms and conditions of employment within the meaning of the NLRA.
The scope of the NLRB’s proposed list of “terms and conditions of employment” subject to joint control may be an area for employers to comment to the NLRB, especially as it pertains to the Board’s proposed “not limited to” language. That expansive language could later allow mischief to occur were the NLRB to later “interpret” that (“not limited to”) language to “open the door” and not limit the NLRB to the list of employer terms and conditions of employment the NLRB has published in the proposed Rule.
Assuming the Proposed Rule eventually moves to Final form and becomes binding law under the NLRA, employers should anticipate the NLRB enforcing the original Browning-Ferris standard in hopes of expanding employer coverage to additional entities and businesses in the context of the NLRA. President Biden is fond of reminding the public that he ran for President both on a commitment to unions and employee rights, but also to make his Administration the most pro-union Administration ever. Expansion of the definition of which companies enjoy a “joint-employer” relationship delivers on that promise to the nation’s unions. Of course, given the recent spate of partisan litigation, the effect of this Proposed Rule, once it becomes Final, will most likely be limited pending court rulings in the predictable employer lawsuits seeking to enjoin enforcement of any new Joint Employer Rule in the predictable Texas federal courts.
Moreover, the NLRB’s Final Rule could (and would, we predict) be overturned pursuant to the Congressional Review Act if Republicans win control of both the U.S. House and U.S. Senate beginning January 3, 2023, following the November 2022 “midterm” elections. But Republicans must win the Senate, even if only by 1 vote…not just crush the Democrats in the House races.
How We Got Here: The Convoluted Recent History of the NLRB’s “Joint Employer” Rule
As readers may recall, in 2015 the NLRB issued a decision in Browning-Ferris Industries of California, Inc., 362 NLRB 1599 (2015). In that case decision, the NLRB expanded the definition of “joint employer” in furtherance of employee rights. In the initial Browning-Ferris ruling, the NLRB held that two companies were joint employers of sorters, screen cleaners, and housekeepers whom the union petitioned to represent. Specifically, the Democrat-controlled NLRB reset the legal standard for joint employment as follows:
“The Board may find that two or more entities are joint employers of a single work force if they are both employers within the meaning of the common law, and if they share or codetermine those matters governing the essential terms and conditions of employment. In evaluating the allocation and exercise of control in the workplace, we will consider the various ways in which joint employers may ‘share’ control over terms and conditions of employment or ‘codetermine’ them…”
As we explained in reporting on that decision, Browning-Ferris (the waste recycler company) had reserved general limitations and protocols in its service contract with Leadpoint Business Services (the staffing agency). The contract running between the two companies was the “reserved control” which animated the union because Browning-Ferris set some terms and conditions of employment for Leadpoint about which the union could not bargain with Leadpoint since Browning-Ferris had set those conditions. For example, the contract established when work and breaks would start and end since Leadpoint employees had to work at Browning-Ferris’ recycling facility, follow BF’s security rules, and work alongside B-F employees when they reported for work and returned from breaks. As a result, the reservation of what the NLRB found to be terms and conditions of work of the Leadpoint employees embedded in Leadpoint’s contract with B-F warranted a finding that the waste recycler company had the ability to share or codetermine who supervised, hired, fired, disciplined, and paid the staffing agency’s employees. The NLRB in the 2015 Browning-Ferris decision therefore altered the prior Bush NLRB standard finding a putative joint employer relationship only if both entities exercised actual control over essential terms and conditions of employment. Browning-Ferris then appealed to the D.C. Circuit Court of Appeals.
During the pendency of that appeal, Republicans won the White House following the election of 2016. In 2017, upon Donald Trump’s assumption of the Presidency and his subsequent appointment of a Republican majority to the National Labor Relations Board, the NLRB overruled the Obama NLRB’s Browning-Ferris standard. In Hy-Brand Industrial Contractors, Ltd., 365 NLRB 156 (2017), the NLRB reinstated the former Bush NLRB test determining when a “joint employer” relationship existed. The Bush NLRB standard had found a “joint-employer” relationship only if an entity exercised actual control over the essential terms of another company’s employees. This required direct and immediate exercise of control “in a manner that is not limited and routine.” The NLRB further asked the D.C. Circuit to remand the Browning-Ferris appeal back to the NLRB so it could adopt the new joint employer standard set forth in Hy-Brand.
However, in 2018, the NLRB returned once again to the Browning-Ferris standard after the NLRB’s Designated Agency Ethics Official determined one of the NLRB Members should have been disqualified from participating in the 2017 Hy-Brand decision. This resulted in the NLRB having to set aside the Hy-Brand decision in 2018 due to the improper participation by the NLRB Board Member. Readers may recall a timeline chart provided in a previous WIR outlining the see-saw changes as to the “joint employer” rule resulting from the withdrawal of the Hy-Brand decision.
Because Hy-Brand no longer applied, the NLRB filed a motion with the D.C. Circuit Court of Appeals to re-open the Browning-Ferris appeal to review the 2015 standard that was now back before the NLRB. Instead, and unfortunately for employers, in December 2018 the D.C. Circuit Court of Appeals upheld large portions of the 2015 NLRB decision. See Browning-Ferris Indus. of Cal., Inc. v. NLRB, 911 F.3d 1195 (D.C. Cir. 2018). Specifically, the Court ruled that the NLRB’s interpretation of the joint-employer test was appropriate. That interpretation required the Board and courts to consider both an employer’s reserved right to control as well as its indirect control over an employee’s terms and conditions of employment as part of the calculus to determine whether a joint-employer relationship existed between the two corporate entities of interest.
As we wrote at the time, the Court agreed with the Obama Administration NLRB decision that an entity did not have to exercise actual control to be a joint employer. The Court issued this decision while the NLRB was nonetheless in the process of issuing a new joint-employer rule to the contrary. These actions lent the impression to employers of a “circus tent” atmosphere surrounding the “joint-employer” test (with employers caught in the political tug-of-war without clear direction either way).
In February 2020, the Trump NLRB then issued a “joint-employer” Final Rule rejecting the Obama NLRB Browning-Ferris standard, countering the D.C. Circuit’s ruling, and angering unions that had pressed for a broad definition rendering two companies involved in the same business activity using each other’s employees for a common objective to be “joint employers”. As we noted at the time, the NLRB defined the act of employers to “share or codetermine” the essential terms or conditions of employment (i.e., the standard the D.C. Circuit adopted from the 2015 Browning-Ferris NLRB decision) to require an entity to possess and exercise “substantial direct and immediate control over one or more essential terms or conditions of their employment as would warrant finding that the entity meaningfully affects matters relating to the employment relationship with those employees.” As expected, the Final Rule became subject to a legal challenge that remains pending. SEIU v. NLRB, Case No. 1:21-cv-02443 (D.C.C. September 17, 2021).
Given all the foregoing machinations, what happened with that original Browning-Ferris case that spawned all this back-and-forth? In July 2020, following the D.C. Circuit Court of Appeals’ remand to the NLRB, the Trump-era NLRB overturned the 2015 Browning-Ferris NLRB decision and found that Browning-Ferris was not a joint employer of employees in the petitioned-for unit. Specifically, the NLRB held that the 2015 decision introduced a new legal standard not previously known or applied in the case. As such, retroactive application of the new standard, the Trump NLRB reasoned would be manifestly unjust. Accordingly, the Trump NLRB held that whether Browning-Ferris was a “joint employer” was a question which should have been considered under the previous, longstanding “joint employer” rule that the 2015 decision attempted to overturn. Unfortunately for employers, however, the D.C. Circuit Court of Appeals this past July struck down this Trump-era NLRB decision for not obeying the Court’s previous remand decision, as we reported.