This case decision now sets the law of “joint-employment” (also known as the “joint-employer” doctrine) within the meaning of the National Labor Relations Act (NLRA). The decision is terribly important for industries relying on a “franchise model,” or host companies using the services of Independent Contractors which the host company weaves closely into its business operations. We broke down the complicated weave of issues and case decisions involving the “joint-employer” issue under the NLRA in our March 5, 2018 OFCCP Week in Review.
The Browning-Ferris case decision arises in the context of a local (Teamsters) union wanting to bargain with BOTH a service company (Leadpoint) as to its employees, AND, with a second (host) company (Browning-Ferris) where the employees of Leadpoint physically reported to work and where Browning-Ferris indirectly controlled, OR had the right to control, some of the terms and conditions of employment of the Leadpoint employees. Apart from the rights of unions to simultaneously bargain with “joint-employers” (for example, the Teamsters could not bargain just with Leadpoint to set the hours of work: a core term and condition of employment; the union also needed to have Browning-Ferris at the bargaining table), the legal issue is also of concern as to the potential for “joint-employer” law more generally to impose shared legal and financial liability (for employment or wage violations or tortious conduct by the joint-employer) between and among any collection of companies operating in close partnership with each other and hosting each other’s employees on their premises as Independent Contractors.
Note: Browning-Ferris operates large recycling centers, including the one at issue in this case located just south of the San Francisco International Airport and visible from Highway 101. While Browning-Ferris operates the conveyor belts and shredding and compacting machinery inside its large recycling factory and removes the processed material out the back door, the Leadpoint employees deliver the recycling material to very large Browning-Ferris recycling feed belts (by the ton every minute) by sorting and placing the material for recycling on one of several of the large feed belts for future processing inside the factory. The Leadpoint employees must also arrive and quit when Browning-Ferris opens and closes its recycling factory for business each day. And because Browning-Ferris has to remove as much material out the back door as is coming in the front door every day, its managers often coordinate with Leadpoint managers and employees “hand-in-glove” to keep the incoming belts moving at a speed consistent with the amount of processed material Browning-Ferris was removing out the back of the factory at that moment in time. Browning-Ferris managers also had an on-going quality control check mandate to ensure that each feed belt Leadpoint employees loaded had the particular type of material intended for that particular feed belt (newspaper and cardboard to the right, and glass and metals to the left, e-waste on the middle belt, etc.). So, while Leadpoint managers could control all actions of its employees, other than when they started and stopped work, Browning-Ferris managers maintained the “right-to-control” the Leadpoint employees to keep the belts moving at proper speeds and with the appropriate recycling material: shared tasks with shared responsibilities.
The NLRB’s Original Decision
The Obama NLRB originally issued a decision [Browning-Ferris Industries of California, Inc. d/b/a BFI Newby Island Recyclery, 362 NLRB No. 186] on August 27, 2015, finding Browning-Ferris was engaged in a “joint-employer” relationship with Leadpoint. The Board ordered Browning-Ferris to bargain with the Teamsters union along with Leadpoint. Note: There is a (rare) automatic right of appeal directly from the NLRB to the United States Courts of Appeals. Here is how the D.C. Circuit described the NLRB’s earlier decision in the Browning-Ferris administrative decision:
“In concluding that Browning-Ferris and Leadpoint were joint employers of the workers in the petitioned-for (collective bargaining) unit, the National Labor Relations Board ruled that it would consider a putative joint employer’s reserved right to control the workers at issue, as well as any indirect control exercised over the workers, as among a number of factors relevant to determining joint-employer status. Browning-Ferris challenges both of those aspects of the Board’s test.”
The New NLRA Legal Standard the D.C. Circuit Just Announced
“We hold that the right-to-control element of the Board’s joint-employer standard has deep roots in the common law. The common law also permits consideration of those forms of indirect control that play a relevant part in determining the essential terms and conditions of employment. Accordingly, we affirm the Board’s articulation of the joint-employer test as including consideration of both an employer’s reserved right to control and its indirect control over employees’ terms and conditions of employment. But because the Board did not confine its consideration of indirect control consistently with common-law limitations, we grant the petition for review in part, deny the cross-application for enforcement, dismiss without prejudice the application for enforcement as to Leadpoint, and remand for further proceedings consistent with this opinion.”
So, the D.C. Circuit has now adopted and has directed the NLRB and the Courts in the future to apply both legal tests AS THE COMMON LAW HAS DEFINED THEM TO BE and were at issue in the Browning-Ferris case (bad for employers).
So Here Is Your New NLRA “Joint-Employer” Legal Standard (until the NLRB changes it, if it does)
The NLRB and the Courts must examine any facts showing that a host company has by contract or practice “reserved the right to control” AND should also examine any facts showing that a host company has exerted “indirect control over employees’ terms and conditions of employment.” (How much “right to control” and how much “actual indirect control” is too much control thus triggering a “joint-employer” relationship will be the subject of future case decisions and another decade-plus of legal uncertainty. If you are one who insists on simple or “litmus paper” yes/no answers and have to deal with “joint-employer” issues, I suggest you either change jobs or invest in a large supply of Valium and Advil. This is going to be a long bumpy ride). The D.C. Circuit has now thrown the Browning-Ferris case back to the NLRB to apply the facts to its new legal standards. How extraordinary: in applying and interpreting a federal statute, the National Labor Relations Act, which the Congress, of course, created and the President signed into law, the Courts now vest themselves with the authority to determine “joint-employer” status WITHOUT REGARD to Congressional or Executive Branch definition.
The NLRB’s Next Chess Move in this Drama
The NLRB now has the Browning-Ferris joint-employer issue pending before it in TWO different contexts: First, the case decision is on remand from the DC Circuit (adjudicatory/enforcement proceeding) and second appears in the form of a pending proposed Rule issued September 14, 2018, now ripe for FINAL issuance. In explaining its proposed Rule, the NLRB wrote in a Press Release last September that:
“Under the proposed rule, an employer may be found to be a joint-employer of another employer’s employees only if it possesses and exercises substantial, direct and immediate control over the essential terms and conditions of employment and has done so in a manner that is not limited and routine. Indirect influence and contractual reservations of authority would no longer be sufficient to establish a joint-employer relationship.”
So, the above two sentences create the new legal test the current Republican-controlled NLRB would like to see BECOME the NLRA definition of “Joint-Employer.”
So, the battle lines are now set: The D.C. Circuit is considered the second most influential Court in the Country on Administrative Law (after the SCOTUS). It has now interpreted the NLRA’s “joint-employer” legal standard to be substantially broader than the Rule the NLRB has pending. The D.C. Circuit opinion also comes from a three-judge panel signed by two liberal Judges President Obama nominated and with a strong Dissent from a venerable senior Judge President H.W. Bush (the father) nominated. To add more fuel to the political fire, the two liberal Judges (Millett and Wilkins) who penned the Browning-Ferris decision two weeks ago were two of the three the Senate failed to confirm in 2013 by the then 60 vote approval requirements. Famously, these are the very judges (plus one other President Obama had nominated and who also failed confirmation at the 60-vote level) whose failed confirmations then caused the then Democrat Senate majority to invoke the so-called “nuclear option” and lower the Senate confirmation vote level for federal judges to a simple majority. This parliamentary procedure then ensured confirmation of all three nominees in late 2013 and early 2014 by a then Democrat-controlled Senate and ensured the anger of Republicans who later in 2016 retaliated against the Democrats by denying Judge Merrick Garland confirmation to the SCOTUS to fill the spot left open by Justice Scalia’s death. This maneuver then opened the door for Republicans to more recently invoke the simple majority vote rule to confirm Judge Kavanaugh, from the D.C. Circuit to the SCOTUS.
The NLRB is anticipating major pushback, including what will surely be vitriolic political chicanery, and carefully calculated lawsuits to try to stop any Final Rule changing the D.C. Circuit’s “Joint-Employer” holding in the Browning-Ferris case. As a result, NLRB lawyers and proponents of the proposed Rule are now actively scouring the public comments to the Proposed Rule and existing writings supporting the proposed Rule to determine whether there is sufficient evidence and language to explain and uphold what will now be a major narrowing of the NLRA should the Rule go to Final form as proposed. Apart from justifying the change of position legally, one has to also consider the political climate surrounding the NLRB’s next move. The NLRB has a Republican quorum, so it has the raw power to issue a Final Rule akin to its proposal. But, the House is now Democrat-controlled, so Democrats and their Labor union allies, will be creating a lot of political noise in an attempt to de-rail the Final Rule (some backroom political swaps perhaps: “log-rolling” as it is called on The Hill), or to at least make Republicans pay politically for their exercise of power if Republicans push through a Final Rule unwinding the D.C. Circuit’s recent Browning-Ferris interpretation of the NLRA. Accordingly, if you are beleaguered by all of the legal uncertainty surrounding the “joint-employer” issue, brace yourself for at least 3-4 more years of Rules, lawsuits, and political bickering…and maybe even a full decade of continuing political sparring and legal uncertainty.
The NLRB has set no date, of course, to issue its Final “Joint-Employer” Rule. The NLRB is thinking, however: “No time like the present,” once the Board writes new language into the Preamble to the Final Rule to try to help bolster the bona fides of its proposed narrowing as the NLRB anticipates the coming legal challenge(s) to its Final Rule. Once all the paperwork is final and ready, it is then just a political decision as to when the White House will say: “Publish.” And, because the NLRB’s Final Rule will be prospective and likely not retroactive, the Browning-Ferris company will be left to separately fight its now lone battle before the NLRB on remand from the D.C. Circuit, or perhaps to seek Rehearing En Banc before the D.C. Circuit(i.e. to have the entire 17 Judge D.C. Circuit Court of Appeals hear the case), or to ask the SCOTUS to hear its case. (It is most likely Browning-Ferris would try to “hang a long punt” and not let its case get decided before the NLRB could issue new legal standards for “joint-employment”). So, in the very end, the NLRB will become a two-tent circus: one ring operating on the Rulemaking front to create a prospective future Trump Administration Rule, and another entirely separate ring operating on the adjudicatory/enforcement side of the house applying the Obama Administration’s definition of a Joint-Employer to Browning-Ferris. So, what’s new with the NLRB? Nothing. Still a political yo-yo like it has always been.
John C. Fox, Esq. is President and Partner at Fox, Wang & Morgan P.C. where he represents companies and tries cases in state and federal courts throughout the United States. Mr. Fox has extensive trial experience, having spent more than 300 days in trial. Mr. Fox was also lead trial counsel in the first of the six wage-hour class actions known to have been tried in California and was lead trial counsel in what are believed to have been the two largest disability law suits in the United States. He is an across-the-board employment lawyer representing management nationwide. Full Bio »