Joint employment has probably been the most talked and written about subject in labor and employment law circles in recent years. It is so important that both the National Labor Relations Board (NLRB) and the Department of Labor (DOL) are attempting to draft regulatory definitions. It affects whether one company is liable for another company's employment relationships, whether an employer has to bargain with a union representing direct employees from another company, whether a union with a primary dispute at another entity can picket the joint employer's establishments, and a host of other labor and employment law ramifications. Its effects go beyond employment matters to include the potential for tort and contract liability, including, but not limited to, user-supplier, lessor-lessee, parent-subsidiary, contractor-subcontractor, franchisor-franchisee, predecessor-successor, creditor-debtor, and contractor-consumer business relationships.
The newest development occurred on December 28, 2018, when the United States Court of Appeals for the District of Columbia Circuit adopted the NLRB's ruling 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 Industries of California, Inc. v. NLRB, Nos. 16-1028, 16-1063, 16-1064. The appeals court upheld the right-to-control element of the NLRB's joint employer standard as meeting the standards of the common law, as the common law permits consideration of those forms of indirect control that play a relevant part in determining the essential terms and conditions of employment. While the appeals court upheld the Obama-era NLRB's articulation of the joint-employer test as including consideration of both an employer's reserved right to control and its indirect control over another entity's employees' terms and conditions of employment, but the appeals court nevertheless remanded the case to the NLRB to confine its consideration of indirect control consistently with common-law limitations.
The fact pattern creating the issue arose when Browning-Ferris entered into an exclusive service contract with a temporary labor services firm that staffed a plant. The temporary labor services firm employed its own on-site managers and supervisors, but Browning-Ferris reserved certain rights in the temporary labor services agreement.
In remanding the case back to the NLRB, the appeals court found problems in applying the indirect control factor within the relevant common-law boundaries that prevent the NLRB from encroaching on the common and routine decisions that employers make when hiring third-party contractors and defining the terms of those contracts. That is, to perform the joint-employer analysis, the relevant forms of indirect control must be those that share or co-determine those matters governing essential terms and conditions of employment. By contrast, those types of employer decisions that set the objectives, basic ground rules, and expectations for a third-party contractor cast no meaningful light on joint-employer status. For example, use of a cost-plus contract is a frequent feature of third-party contracting and subcontracting relationships. Further, the NLRB provided no blueprint for what counts as "indirect" control, as not everything conveyed through an intermediary implicates the essential terms and conditions of work. For example, routine contractual terms, such as a very generalized cap on contract costs, or an advance description of the tasks to be performed under the contract, would seem far too close to the routine aspects of company-to-company contracting to carry weight in the joint-employer analysis. Whether Browning-Ferris influences or controls the basic contours of a contracted-for-service - such as requiring four lines' worth of sorters plus supporting screen cleaners and housekeepers - would not count under the common-law. The legal standard enunciated by the appeals court is that the joint-employer's control, whether direct or indirect, exercised or reserved, must bear on the "essential terms and conditions of employment" to be significant for joint-employment purposes, to distinguish that situation from routine components of a company-to-company contract.
The appeals court also states a second reason for the remand to the NLRB, noting the NLRB's holding that even if it finds the common-law would deem a business to be a joint-employer, the Board will also ask "whether the putative joint employer possesses sufficient control over employees' essential terms and conditions of employment to permit meaningful collective bargaining" before finding joint-employer status under the Act. In other words, the existence of a common-law employment relationship is necessary, but not sufficient, to find joint-employer status under the Act.
There is some significant history in the Browning-Ferris case, including that it was overturned by the NLRB itself in the Hy-Brand Industrial Contractors case decided by the Trump-era NLRB in December of 2017. In Hy-Brand (a case handled by the Wimberly Lawson firm), the NLRB expressly overruled its Browning-Ferris decision and announced that a finding of joint employer status would require: (1) proof that the alleged joint-employer entities have actually exercised joint control over essential employment terms (rather than merely having reserved the right to exercise control); (2) the control exercised must be direct and immediate (rather than indirect); and (3) joint-employer status will not result from control that is limited and routine. However, due to an Inspector General report that one of the Board members improperly sat on the Hy-Brand case who was a shareholder in a law firm that represented the temporary employment agency before the Board in the Browning-Ferris case, the NLRB vacated its Hy-Brand decision and announced that the overruling of the Browning-Ferris decision was of no force and effect.
In addition to the ruling itself, the appeals court ruling in Browning-Ferris applied a rationale giving the courts, not the NLRB, the full right to determine the common-law application of joint employment. The appeals court finds that the content and meaning of the common-law such as the joint-employment issue is a "pure" question of law which the court is entitled to determine with the resolution requiring no special administrative expertise that a court does not possess. The appeals court also indicates that a court has the same independent right to determine independent contractor status as it does to determine the joint-employer inquiry, although the standards for independent contractor and joint employer are slightly different.
There is much significance in the rationale for the ruling, as it suggests that the courts, at least the District of Columbia Circuit Court of Appeals, will independently review whether a joint-employment relationship has occurred, without regard to the expertise of the agency, in this case the NLRB, and the court will apply its own definitions or applications. This rationale thus suggests that the NLRB will have a much more difficult time enacting and enforcing a regulation dealing with the definitions of joint employment, as the definition will be determined under the common-law and independently determined by a court, without regard to the NLRB's interpretation.
Editor's Note - The next steps in the joint-employer issue are quite confusing. The NLRB could simply render a decision in a pending case setting forth a different standard, which itself would create a potential for a court of appeals review of the issue, perhaps outside of the D.C. Circuit, and the D.C. Circuit's ruling would not be binding. Ultimately, it might go to the U.S. Supreme Court. In addition, the NLRB could implement a regulatory definition allowing indirect control to be considered but alone would not be sufficient for joint-employment status.
In any event, the discussion set forth in these cases and summarized in this article should be considered in a company's contract with other entities who provide their own employees. Whatever the various factors are relevant evidence or what standards will be determinative, is not totally clear at this point. At least, employers have a pretty good idea of the arguments that will be made.
Similar issues are pending at the U.S. Department of Labor (DOL), as the DOL is considering the possibility of its own regulation on the joint-employment issue.