The District of Columbia U.S. Circuit Court of Appeals’ decision in Browning-Ferris Industries of California, Inc. v. National Labor Relations Board held that an employer’s authorized, but unexercised, forms of control — as well as an employer’s indirect control over employees’ terms and conditions of employment — can be included in a common-law joint employer analysis. This 2-1 decision, handed down Dec. 28, marks yet another analytical refocusing of the joint employer relationship in what is already a murky legal conversation.
The Court of Appeals reviewed a 2015 NLRB decision and affirmed the NLRB’s articulation of a new joint employer standard that includes consideration of both an employer's reserved right to control and its indirect control over employees' terms and conditions of employment. However, the court held that the NLRB failed to confine the applicability of indirect control to the essential terms and conditions of the workers’ employment and sent that aspect of the decision to the NLRB.
Takeaways
The primary takeaway from this case is that a “reserved right of control” and the exercise of “indirect control” are now relevant factors in a joint employer inquiry. This is a clear change from the pre-2015 test that considered only actual and direct control.
The secondary takeaway is that at least three salient questions were left unanswered as a result of the Court’s disposition.
1. What kind of indirect control demonstrates a joint employer relationship?
The court held that “the relevant forms of indirect control must be those that share or co-determine those matters governing essential terms and conditions of employment” and indicated that indirect control that “simply documents the routine parameters of company-to-company contracting” should not be considered, but left the task of defining this type of indirect control to the NLRB.
2. How much indirect control demonstrates a joint employer relationship?
The court refused to delineate whether indirect control alone could be sufficient to establish a joint employer relationship. It is therefore unclear what ratio of direct to indirect control could establish a joint employer relationship. Indirect control may only be relevant to support evidence of direct control, or it may be relevant on its own.
3. What effect does this decision have on the NLRB’s pending rulemaking?
The NLRB is engaged in a rulemaking on the standard for joint employer status, which is scheduled to remain open for comment until Jan. 28. The majority opinion addressed the procedural timing of its decision by holding that the task of defining the common-law scope of “employer” lies with the courts rather than administrative bodies. Essentially, the majority held that the NLRB's rulemaking must utilize the common-law definition of “joint employer” announced by the court.
The dissent argued that the timing of this opinion is inappropriate and suggested that a possible outcome of the rulemaking could be to restore the pre-2015 standard. In a footnote, the dissent explained that the D.C. Circuit does not have exclusive jurisdiction to review NLRB rules. Thus, a challenge to the final NLRB rule could be brought in another circuit, which would have no obligation to follow the majority opinion in this case.
What To Expect
The NLRB will have an opportunity to provide clarity when it considers the case on remand and through its pending rulemaking process. While it is likely that joint employer liability will be expanded, there is ample opportunity for the NLRB to reduce the extent of that expansion by clarifying how evidence of indirect control impacts the analysis. The D.C. Circuit’s decision may also face scrutiny in the form of an en banc reconsideration (by the full court bench) or appeal to the U.S. Supreme Court.
What Does This Mean For Businesses?
This decision will most likely expand joint employer liability and increase litigation. An unintended joint employment relationship can expose a business to unexpected consequences, including wage and hour lawsuits, legal obligations resulting from a successful union organization at a contractor’s worksite, discrimination and harassment lawsuits, and liability for workers’ compensation claims. While the exact contours of the joint employer standard will continue to be filled in, employers may consider adopting contract language that disavows any joint employer relationship with its contractors and specifically limits the control they are able to exercise over a contractor’s employees to matters within the routine parameters of company-to-company contracting.
What Does This Mean For Public Agencies
This decision does not immediately affect California public employers, but it may be a sign of things to come. Public agencies are not bound by the National Labor Relations Act or the decisions of the NLRB. California has its own labor relations statutes that are primarily administered by the Public Employment Relations Board. However, PERB regularly applies NLRB holdings to its own cases. It is very possible that PERB will rely on the NLRB’s construction of the joint employment standard in future cases.
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