D.C. Circuit Court of Appeals Partially Upholds Obama-Era Joint Employment Standard

On December 28, 2018, a divided Court of Appeals for the District of Columbia Circuit upheld portions of an Obama-era standard for determining “joint employer” status under the National Labor Relations Act (NLRA), ultimately sending the case back to the National Labor Relations Board for clarification and reassessment.

In the case before the court of appeals, Browning-Ferris Industries v. National Labor Relations Board, the court reviewed the validity of the joint-employer standard the Board articulated in its 2015 Browning-Ferris decision.  In that case, the Board dramatically expanded the definition of joint employer, and categorized many more independent companies as potential joint employers, upending years of precedent.  By way of context, joint-employer status can bring significant consequences for an employer:  a joint employer may be required to bargain with a union representing jointly employed workers; can be subject to joint and several liability for unfair labor practices committed by the other employer; and may be subject to labor picketing that would otherwise be unlawful.

Under the Board’s 2015 Browning-Ferris standard, two entities may be deemed joint employers based on the mere existence of reserved joint control, indirect control, or control that is limited and routine.  This contrasts starkly with prior precedent, which required that a potential joint employer exercise actual control over essential employment terms, with such control being “direct and immediate.”  The Browning-Ferris decision was the subject of intense scrutiny, including congressional hearings geared toward overturning it.  The U.S. House of Representatives passed the Save Local Business Act, legislation which would have overturned Browning-Ferris, in the fall of 2017, although the U.S. Senate failed to act on the measure.  This legislation came on the heels of oversight hearings in the House Committee on Education and the Workforce Subcommittee on Workforce Protections, chaired by Representative Bradley Byrne (R-AL), which focused on the joint-employer issue.

In its decision last week, the court of appeals reviewed the Board’s Browning-Ferris standard, examining specifically whether an employer’s “right to control” another company’s employees, or its “indirect” control over them, are appropriate factors in assessing joint-employer status.  In a 2-1 decision, the court held that such factors could be probative of joint-employer status in a fact-based, case-by-case analysis.  Importantly, the court expressly declined to consider whether the mere unexercised “right to control” another company’s employees, standing alone, would be sufficient to establish a joint-employment relationship.

While the court endorsed the consideration of these factors as a legal matter, it held that in this case, in finding that the two subject companies were joint employers, the Board had applied the concept of “indirect control” too broadly.  The court sent the case back to the Board with direction that it reevaluate the case by considering “indirect control” of only those factors directly related to the terms and conditions of employment of the subject employees.  The court noted that by “failing to distinguish evidence of indirect control that bears on workers’ essential terms and conditions from evidence that simply documents the routine parameters of company-to-company contracting,” the Board had exceeded its authority and “overshot.”  Moreover, the court held, “'global oversight' is a routine feature of independent contracts” – not a factor that should create a joint-employment relationship.

A dissenting opinion argued that the court’s majority had misstated the common law of employment in coming to its conclusions, and that action on the case should be held in abeyance in any event, pending the completion of a Board rulemaking to establish a joint-employer standard currently in progress.

The majority’s opinion means continued confusion for employers as to whether a court or agency might find their companies “joint employers” of a wholly-unrelated entity.  Similarly, what constitutes standard business-to-business practices or routine aspects of contracting that have no bearing on joint-employment status remains unclear, giving employers little guidance as to how to structure corporate operations or transactions.

As noted above, the court’s decision comes as the Board is in the middle of an active rulemaking to set a joint-employment standard by way of regulation.  On September 14, 2018, the Board issued a notice of proposed rulemaking setting forth a proposed joint-employer standard largely consistent with pre-Browning-Ferris law.  Comments on the proposed rule are due on January 14, 2019 (comments replying to submitted comments must be filed by January 22, 2019).  The impact, if any, of this case on the Board’s proposed rule and rulemaking is unclear, but years of continued legal uncertainty suggest there is ample room for explanation and clarification of the rules of the road around this highly complex subject.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.