Ahead of New Rule, D.C. Circuit Upholds Obama-era Joint Employer Test

Ruling confuses the joint employer issue for companies while the NLRB GC seeks to clarify it, management-side attorneys say

While the National Labor Relations Board is finalizing its employer-friendly joint employer rule, an appeals court has complicated the issue with a ruling that has management-side labor attorneys scratching their heads.


In a 2-1 decision on Dec. 28, the D.C. Circuit Court of Appeals partially upheld the Obama-era NLRB’s broad, worker-friendly test to determine joint employers. The NLRB under President Trump is trying to reverse that test in a rule it proposed back in September, and it’s unclear what bearing the appellate decision will have on that rule when it becomes final. Many companies eagerly anticipate the rule, which will determine whether they could be jointly liable with other companies for labor law violations.

In the 2015 landmark decision in its Browning-Ferris Industries case, the NLRB expanded the definition of a joint employer relationship in a way that opened up many employers to a vast amount of labor liability. The case originated in 2013 when Browning-Ferris, a recycling plant operator, was drawn into collective bargaining activity by employees of Leadpoint, a staffing company it contracted with to fill positions at the plant. The union claimed Browning-Ferris and Leadpoint were joint employers, and the NLRB agreed. 

In the Browning-Ferris decision, the Obama-era NLRB ruled that an employer can be a joint employer of another entity’s workers if it had indirect control over the workers’ essential terms and conditions of employment, even if it never exercised direct control. The decision suggested that more employers could be on the hook for unfair labor practice charges and collective bargaining activity that workers bring against their franchises or the contractors and staffing agencies they work with.

Last month the D.C. Circuit supported the Obama NLRB’s decision to consider indirect control in its joint employer test, saying the Browning-Ferris test had “deep roots in the common law.” The court remanded the case back to the NLRB to decide Browning-Ferris again, however. The majority ordered the board to parse where the Browning-Ferris had indirect control over essential terms and conditions of the employment of Leadpoint’s workers, apart from the routine aspects of company-to-company contracting.

The appellate decision to uphold the NLRB’s existing joint employer standard, and when a new standard is on the way, muddied the waters for employers trying to figure out their legal exposure in their business relationships.

“The D.C. Circuit’s decision just didn’t help at all,” said Bill Berger, a solo labor and employment attorney who founded L2S Legal. What makes the decision confusing, he said, is that the court said the Obama board was right to consider indirect control when determining a joint employer relationship, but neither the board nor the court defined indirect control. “That’s just not helpful, especially since the whole issue has been what exactly this idea of ‘indirect’ control is under the board’s test. How is it that the D.C. Circuit knew it was O.K. for the board to consider ‘indirect’ control when nobody knows what ‘indirect’ control actually is?”

In his dissent, Judge A. Raymond Randolph chided the majority for handing down a decision in Browning-Ferris while the NLRB’s new joint employer rule was still in the works. He accused the majority of trying to “confine the scope” of the board’s rulemaking and influence its outcome.

It’s unclear what influence the D.C. Circuit decision will have on the NLRB’s final joint employer rule, and whether the board might nudge it to align more with the majority’s views, particularly its emphasis on common law.

“People think it may complicate the rule-issuing process, that it may make the board think about putting something in there about what basis [on which] they’re issuing this rule,” said Patrick Scully, a labor and employment attorney who is a member at Sherman & Howard in Denver.

The NLRB has extended the deadline for public comments on the joint employer rule until Jan. 14, and the board will accept responses to those comments until Jan. 22.

But one notable public comment, submitted Dec. 10, has come from the NLRB’s own General Counsel Peter Robb. While he called for the Browning-Ferris test to be overturned, he said its proposed replacement doesn’t go far enough in providing clarity and predictability for employers.

Robb suggested the final rule should define essential employment terms as well as spell out how much control an employer needs to have over another entity’s workers for there to be a joint employer relationship. He also urged the board “to articulate explicitly in its final rule that a joint employer finding in and of itself does not create legal liability for the unfair labor practices of its coemployer business partner,” or force an employer “to sit at the bargaining table with its co-employer’s employees’ labor representative.”

“The general counsel is saying, let’s tell people what the law is so they know when they’re going to get prosecuted,” Scully said. He added that one of the major criticisms employers had of Richard Griffin, the NLRB GC under the Obama administration, was that he was vague as to how zealously he would enforce the broadened joint employer standard. Scully said he welcomes a more specific joint employer test like Robb suggests “because it makes it easy for me to advise my clients.”

There may be yet another complicating matter for employers before the stricter joint employer rule comes out: Democratic control of the U.S. House of Representatives. Berger said House Democrats could use their new investigative and funding power to target the NLRB in addition to other agencies that are issuing conservative policies under the Trump administration. Specifically, they can slow down the board’s rule changes by opening investigations into board decisions, demanding testimony and restricting funding to the agency, he said. The joint employer issue is as politically charged as any the NLRB currently handles, and the new rule could draw scrutiny from House Democrats.

With that in mind, Berger still thinks “it’s more likely than not” that the Obama-era rule will get reversed. “But I wouldn’t hold my breath.”

— Doug Chartier

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