Divided D.C. Circuit Upholds NLRB’s Obama-Era Joint Employer Standard (While the NLRB’s Notice of Proposed Rulemaking to Revise the Standard Remains Pending)


On December 28, 2018, the U.S. Court of Appeals for the D.C. Circuit, in a divided decision, upheld the NLRB’s joint employer standard in Browning-Ferris Indus. of California, Inc. v. National Labor Relations Board.  Although the court majority concluded that the Board had authority to adopt the new standard, it denied enforcement of the Board’s order and remanded the case because the Board failed to apply the standard properly and failed to explain adequately the basis for its decision finding joint employment.

Facts of the Case

A full recitation of the facts of the case is set forth in our prior e-publication, issued in 2015 when the NLRB reversed its then-current standard for determining joint employment status. In summary terms, Browning Ferris Industries (BFI) contracted with another entity (LBS) to supply workers under a labor services agreement.  Approximately 240 LBS employees performed work at a BFI facility and were directly supervised by onsite managers employed by LBS.  LBS was responsible for hiring the workers, subject to ensuring that they met certain conditions (i.e. drug screening) and qualifications specified by BFI.  Under the labor services agreement, LBS had the sole responsibility for counseling employees, managing performance, establishing rates of pay, imposing discipline, and terminating.

BFI retained the right to take measures to ensure workers were free from the effects of alcohol and illegal drugs.  BFI also was permitted to reject or discontinue the use of a worker for any or no reason.  BFI determined how many shifts there would be and the duration of the shifts.  BFI supervisors would also decide, on a daily basis, which production lines would run (and LBS supervisors staffed the lines). If BFI determined overtime would be needed for production reasons, LBS would ensure that the lines were staffed.

When a union petitioned to represent all of the employees, they designated BFI and LBS as joint employers of the workers.  An ALJ determined that under existing precedent, BFI and LBS were not joint employers.

The NLRB’s Decision

The NLRB found that BFI and LBS were joint employers.  The Board held that two or more employers are joint employers of the same employees if they “share or codetermine those matters governing the essential terms and conditions of employment.”  The first question in applying the standard is “whether there is a common-law employment relationship with the employees in question.”  If so, then the next question is whether the “employer” in question “possesses sufficient control over employees’ essential terms and conditions of employment to permit meaningful collective bargaining.”  For purposes of control, the Board said it would no longer require that both employers exert actual control, but instead would consider an employer’s reserved right to control and indirect control (a standard far more expansive than prior Board precedent, which the case overruled).  Finding that BFI frequently exerted indirect control over LBS workers, the Board found joint employer status.

The Court’s Ruling

The D.C. Circuit held that the standard articulated by the NLRB for joint employment was legally supported and should be upheld. Considering reserved authority and indirect control as relevant factors in determining joint employment status, the court reasoned, is consistent with the common law. The court noted that the Supreme Court has long held that the test for joint employment under the NLRA is determined by the common law of agency.  The court stated, “the common-law inquiry is not woodenly confined to indicia of direct and immediate control; an employer’s indirect control over employees can be relevant considerations.”

However, the court reversed the Board because its decision failed to set “guide posts” for defining indirect control and “failed to differentiate between those aspects of indirect control relevant to status as an employer, and those quotidian aspect of common law third-party contract relationships.”  The court reasoned that exerting “global oversight” over a party that supplies labor is a routine feature of independent contact relationships, while exerting direct and indirect control over their terms and conditions of employment is not.  Because the court could not tell from the record the facts that proved dispositive to the Board, the court remanded the case so that the Board could reexamine the facts and identify the facts that support its conclusion.

The dissenting judge objected that the majority should not have decided the case because the Chairman of the NLRB had sought a remand without decision in light of the NLRB’s issuance of a notice of proposed rulemaking to promulgate regulations to establish a joint employer rule.  (Our September 2018 E-Lert, discussed the NLRB’s proposed rule, and as noted  in our News and Events section of this E-Update, Shawe Partner  Parker E. Thoeni was involved in drafting comments that were submitted to the NLRB on the proposed rule).  The dissenting judge noted that the NLRB is authorized to set standards by regulation rather than decisions in contested case, and opined “the majority opinion – without any reasonable explanation – threatens to short-circuit the Board’s choice, to control and confine the scope of its rulemaking, and to influence the outcome of that proceeding.”

Lessons Learned

The posture of this case is convoluted, to say the least.  On remand, the Board will be required by “law of the case” to apply a standard to Browning-Ferris that is likely to be abandoned by a new rule.  However, facts are subject to interpretation.  Because the Board has been instructed by the D.C. Circuit to examine the facts and explain its conclusions under the now judicially approved standard, a differently constituted Board may well decide that the indirect control exercised in this case is not the sort that creates joint employer status after all.  Instead, it may be found to be the sort of global control that is indicative of a bona fide independent contractor relationship.  Stay tuned.