The “Joint-Employer” Saga Continues

16 January 2019 Legal News: Distribution & Franchise Publication
Authors: Aaron E. Chibli Peter Lawrence Loh

Litigation continues over the standard for determining how and under what circumstances a joint-employer relationship can exist. On December 28, 2018, the United States Court of Appeals for the District of Columbia Circuit partially upheld the National Labor Relations Board’s standard as articulated in its decision in Browning-Ferris. Browning-Ferris Industries of Cal., Inc. v. NLRB, No. 16-1028, 2018 WL 6816542 (D.C. Cir. Dec. 28, 2018). However, the Court’s decision has created more uncertainty due to how it analyzed the question.

Background

The case came before the Court on appeal from the Board’s seminal decision in Browning-Ferris Industries of California, Inc., 362 NLRB 186 (2015). In Browning-Ferris, the Board ruled that employer-employee relationships could exist if the alleged employer possessed either indirect or direct control over the terms and conditions of the employees’ employment – regardless of whether it ever actually exercised such authority. This decision departed from the 30-year-old standard of “direct and immediate control” and, thus, dramatically expanded the conditions under which an entity could be deemed a joint-employer.

Then, in December 2017, the Board reversed Browning-Ferris and reinstated the previous “direct and immediate control” standard for determining the existence of a joint-employer relationship. Hy-Brand Industrial Contractors, Ltd., 365 NLRB 156. Hy-Brand, however, was short-lived, as the Board vacated the decision two months later because of a conflict of interest on the part of a Board member. Thus, the Browning-Ferris joint-employer standard was revived.
Meanwhile, Browning-Ferris petitioned the D.C. Circuit to review the validity of the Board’s underlying 2015 decision.

The D.C. Circuit Decision

The D.C. Circuit specifically examined whether an employer’s “right to control” another company’s employees and whether its “indirect control” over them are appropriate factors in the joint-employer analysis. Browning-Ferris, No. 16-1028, 2018 WL 6816542, at *9 (D.C. Cir. Dec. 28, 2018). In doing so, the Court applied the common law of agency and held that both “reserved authority to control and indirect control can be relevant factors in the joint-employer analysis.” Id. at *20. The Board can then weigh those factors on a case-by-case basis. Id. at *19. In a 2-1 decision, the Court upheld the ultimate result of Browning-Ferris.

However, the Court took issue with how the Board analyzed the indirect control element of the joint-employer test. Id. at *15. The Court found that the Board applied the concept of indirect control too broadly and provided no blueprint for how an entity could be subject to the broader standard. Browning-Ferris, 2018 WL 6816542, at *18. Specifically, the Court took issue with the Board’s failure to distinguish between indirect control over routine matters that are intrinsic to third-party contracting relationships (e.g., objectives, basic ground rules, and expectations of a third-party contractor), and indirect control over essential terms and conditions of employment (e.g., an intermediary or disciplinary measures). See id. at *15-18. Consequently, the Court remanded the case back to the Board for it to properly define the parameters of what it considers “indirect control.” Id. at *9.

What Happens Next?

For now, the joint-employer standard as stated in Browning-Ferris remains. However, the Board itself is in the process of proposing rulemaking inconsistent with its own original decisions and the D.C. Circuit’s December 2018 ruling. The proposed rule would require a finding that the alleged employer actually used its authority in a substantial, direct, and immediate manner over the employees – essentially restoring the narrower, pre-Browning-Ferris joint-employer standard. The public had until January 14, 2019, to submit comments.

The impact of the Court’s decision on the Board’s proposed rulemaking remains to be seen, but the Court cautioned the Board to “color within the common-law lines identified by the judiciary.” Id. at *9. If you have questions about the state of the law on joint-employer standards or the Board’s proposed rule, please don’t hesitate to contact your Foley & Lardner attorney.

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