11.6.18

On October 30, the National Labor Relations Board extended the period for public comment on its proposed rule concerning joint employment. The new deadline is December 13, and comments on the comments will be received through December 20.

The extension was issued in response to an October 10 letter from Rep. Robert C. Scott (D-Va.) and Sen. Patty Murray (D-Wash.) and an October 17 motion from multiple labor organizations for a 60-day extension of the comment period and to schedule public hearings. The Board granted a 30-day extension (rather than the 60 days requested) and denied the request to schedule public hearings.

Rep. Scott and Sen. Murray are the highest-ranking minority-side lawmakers on committees in Congress with oversight of labor and employment issues. They criticized the proposed regulations when issued, and in their October 10 letter alleged that the proposed regulations lacked an extensive analysis of the effects of the Browning-Ferris standard that the rulemaking will essentially reverse. They requested that the Board provide them with extensive information about cases involving the joint employer standard since Browning-Ferris. The Board apparently responded with a list of cases in which the term “joint employer” was mentioned.

The proposed regulations

The proposed regulations are intended to return the joint employer standard under the National Labor Relations Act to the one that existed before the Obama Board’s decision in Browning-Ferris. For a finding of joint employment under the older standard, which had been in place through various partisan majority compositions of the Board, the entity would be required to exercise “direct” and “immediate” control over the employees at issue. Under the Browning-Ferris standard, an entity is a joint employer if it merely has “reserved” or “indirect” control, even if that control is never actually exercised.

The proposed rule provides, in part, as follows:

An employer, as defined by Section 2(2) of the National Labor Relations Act (the Act), may be considered a joint employer of a separate employer’s employees only if the two employers share or codetermine the employees’ essential terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction. A putative employer must possess and actually exercise substantial direct and immediate control over the employees’ essential terms and conditions of employment in a manner that is not limited and routine. 

Background

In 2015, the Democratic-majority NLRB relaxed and expanded the Board’s joint-employment standard in Browning-Ferris. The employer asked the U.S. Court of Appeals for the District of Columbia Circuit to review that decision.

After Republicans regained the majority on the Board under the Trump Administration and before the D.C. Circuit had ruled, the Board in December 2017 issued Hy-Brand Industrial Contractors, Ltd., which returned to the traditional standard. But then, Republican Member William Emanuel came under attack for failing to recuse himself from the Hy-Brand case because his former law firm had represented one of the parties in the Browning-Ferris case. In February 2018, the three other Members of the Board, in an unprecedented and possibly invalid action, excluded Member Emanuel from the Hy-Brand case and then vacated the Hy-Brand decision entirely. (The employer thereafter filed a motion for reconsideration of the Board’s decision to vacate Hy-Brand.)

In the meantime, the D.C. Circuit had sent the Browning-Ferris case back to the NLRB because of the change of the applicable standard under the December 2017 Hy-Brand decision.

In June, the NLRB denied the employer’s request for reconsideration of its decision to vacate Hy-Brand, and the Board also requested that the D.C. Circuit take Browning-Ferris “out of abeyance and continue processing it in the regular course.” The Board also announced that it would issue regulations on the joint employer standard, possibly, in part, to ward off any further recusal issues.

In turn, Browning-Ferris, the employer, asked the D.C. Circuit to remand the case to the Board, arguing in part,

Although the joint-employer rules developed would not apply directly to this case ... the reasoning underlying those rules presumably would bear upon this case if it is remanded ... Given that the NLRB has undertaken definite measures to reconsider the standard governing its treatment of this case, the better outcome is to not have this case be an outlier in relation to the Board's new policy.

At present, the Browning-Ferris case is still pending at the D.C. Circuit.

Another joint employer case at the Board?

Legal commentators have kept an eye out for other cases that might be appropriate vehicles by which the Board can once again address and overrule the Browning-Ferris standard, without even the attenuated arguments for recusal that ultimately disabled the Hy-Brand decision on arguably debatable grounds. Of three such cases regularly mentioned as potential vehicles for such a ruling, only one apparently remains pending before the Board in a posture that could be appropriate for the Board to decide whether the Browning-Ferris standard should be overruled. It is Orchids Paper Products Co.

Orchids Paper involves multiple unfair labor practice charges against a paper products company that used temporary employees from a staffing company at a plant in Oklahoma. The global issue in the case is whether the temporary employees are covered under a collective bargaining agreement with the paper company’s employees at the plant. The staffing company, a union local, and the Board settled the charges against the staffing company, but the Board continued to prosecute the charges against the paper company.

The Administrative Law Judge, applying the Browning-Ferris standard, found that the paper company was responsible for multiple unfair labor practices vis-à-vis the temporary employees. However, the ALJ found joint employment because the paper company and staffing company “directly” co-determined the essential terms and conditions of employment for the temporary workers. This “direct control” does not seem to make the case ideal for revisiting the Browning-Ferris standard.  Nevertheless, the Board could say that the ALJ was wrong to rely on or even cite to Browning-Ferris at all.

Legislation in the works?

In what was largely a party-line vote in 2017, the Republican-majority House of Representatives approved the “Save Local Business Act,” a bill intended to amend the NLRA and the Fair Labor Standards Act. If signed into law, the Act would confine joint employer status to situations in which the putative employer “directly, actually, and immediately, and not in a limited and routine manner, exercises significant control over essential terms and conditions of employment.” The bill has stalled since being sent to the Senate in November 2017. Even if the Senate takes up the legislation in 2018, it almost surely would face a filibuster by Democrats and would not pass.

U.S. Department of Labor gets into the mix

According to a report from the Bloomberg BNA Daily Labor Report, Secretary of Labor Alexander Acosta told a hospitality industry group that the U.S. Department of Labor was “’giving serious consideration to writing a rule’ to clarify when a franchise is liable for acts by its franchisees.” Acosta reportedly told the group, “’I want to let you know that we’re in the process of considering how to provide a more clear and more permanent approach ... It’s so important to know the rules of the road’ when it comes to joint employer liability.”

Secretary Acosta’s comments followed a press release issued on June 7, 2017, in which the DOL announced that it was withdrawing joint employment guidance issued in January 2016 by the Obama Administration. The Obama guidance, Administrator’s Interpretation No. 2016-01, said “[t]hat the concept of joint employment, like employment generally, should be defined expansively under the FLSA and [the Migrant and Seasonal Agricultural Worker Protection Act].”

Importance of the joint employment standard

The legal standard for joint employment under the NLRA remains in play subject to the political back-and-forth of Washington. Organized labor would like the widest range of bargaining unit options to secure footholds among workers.  Organized labor would also like to have the broadest range of employers to target for bargaining and legal leverage through unfair labor practice charges under the NLRA. The Browning-Ferris standard gives unions that broad range of options.

Conversely, employers generally want the flexibility and ability to use creative and on-demand resources for labor while minimizing the legal risk of claims by, and collective bargaining obligations with respect to, workers over whom they do not exercise sole control. Use of temporary employees, contractors, subcontractors, and franchise business models sometimes can provide employers with flexibility to provide gainful work opportunities to employees with less risk to the employers.

Constangy attorneys have experience in drafting and filing comments on proposed regulations related to labor and employment matters. Please feel free to contact us if that is of interest to you. Again, the deadline for comments on the NLRB rulemaking is December 13. Until final regulations are issued and in effect, employers should be prepared for all the possibilities of joint employer status.

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