NLRB’s New Joint Employment Rules Fail…But Live to Fight Another Day

No matter your political persuasion, there is little argument that during the second term of the previous administration, multiple federal agencies made landscape-altering changes to federal labor policy. These changes included rewriting guidance on independent contractor standards and accelerating the speed at which union organizing elections would occur following the filing of a representation petition.  In some circumstances, the changes occurred after a lengthy public notice and comment process; in others, federal departments and agencies merely announced they had changed the rules.

Perhaps no such change during the Obama administration caused more consternation than the substantial expansion of the joint employer test used by the National Labor Relations Board (NLRB).  That change has already had and if upheld, will continue to have, serious ramifications on many subcontractor relationships, creating new and substantial union-related obligations for businesses that do not employ the workforce at issue.

The Trump administration has taken a different approach. For example, it recently signaled its intent to dial back policy changes by withdrawing Obama-era Department of Labor (DOL) guidance for the independent contractor and joint employment tests used for wage and hour purposes.

But what about the NLRB’s joint employer sea change? What does the future hold there?

While a federal court recently sternly criticized the NLRB’s use of that test in a particular circumstance, regrettably for employers desiring clarity on this issue, the court explicitly avoided either an endorsement or rejection of the joint employer standard. Instead that particular court took a “stay tuned, the answer is on the way” approach.

Earlier this year, in a case addressing another federal agency departure from decades of consistent approach to labor relations policy, the United States District Court for the District of Columbia Circuit (D.C. Circuit) chided both the NLRB and the National Mediation Board for abruptly changing the legal standards they applied in determining whether airline contractors fall under the National Labor Relations Act or the Railway Labor Act.  The court made plain that federal agencies cannot change their rules on a lark and without giving a reasoned explanation for why they decided to change those rules.

The D.C. Circuit recently took a similar approach in criticizing the NLRB for applying its new joint employment test without explaining why the past decades of settled law should no longer apply.  Noting that the NLRB had not even acknowledged many of its most important prior joint employment decisions, the court stated that “silence in the face of inconvenient precedent is not acceptable” and refused to allow application of the NLRB’s new joint employment rules to the employer at issue.

Though the D.C. Circuit thus did not endorse the new joint employment rules, it also made clear that it was not rejecting them. Instead, the court explained that those rules were under review in another case, and in that case, the NLRB had in fact acknowledged its prior precedents, conceded it was changing the rules, and provided an explanation for why it felt the rules should change.  As a consequence, employers (and of course their counsel) must continue to wait for clarity as to which joint employment standards the NLRB will ultimately be permitted to apply and what degree of union-related responsibilities companies that subcontract work to unionized employers must bear.

Given the magnitude of this issue, the D.C. Circuit’s forthcoming decision is sure to merit continued close attention and has the hallmarks of further appellate and even United States Supreme Court review. Stay tuned, indeed.