DC Circuit Upholds Part of NLRB's 2015 Joint Employer Analysis, Pans its Ambiguous Application to Facts | Practical Law

DC Circuit Upholds Part of NLRB's 2015 Joint Employer Analysis, Pans its Ambiguous Application to Facts | Practical Law

In Browning-Ferris Industries of California, Inc. v. NLRB, the majority of a three-judge panel of the US Court of Appeals for the District of Columbia Circuit affirmed in part the National Labor Relation Board's (NLRB) joint employer standard, but granted in part the putative joint employer's petition for review.

DC Circuit Upholds Part of NLRB's 2015 Joint Employer Analysis, Pans its Ambiguous Application to Facts

by Practical Law Labor & Employment
Law stated as of 29 Jul 2022 • USA (National/Federal)
In Browning-Ferris Industries of California, Inc. v. NLRB, the majority of a three-judge panel of the US Court of Appeals for the District of Columbia Circuit affirmed in part the National Labor Relation Board's (NLRB) joint employer standard, but granted in part the putative joint employer's petition for review.
On December 28, 2018, in Browning-Ferris Industries of California, Inc. v. NLRB, the majority of a three-judge panel of the US Court of Appeals for the District of Columbia Circuit (DC Circuit) affirmed in part the NLRB's joint employer standard, but granted in part the putative joint employer's petition for review. The DC Circuit ruled that the NLRB may, consistent with the common law of agency, consider both reserved authority to control and indirect control to be relevant factors in its joint employer analysis. ( (D.C. Cir. Dec. 28, 2018).)

Background

In August 2015, in Browning-Ferris Industries of California, Inc., the NLRB issued a new standard for determining whether multiple entities jointly employ workers who petition for union representation (362 N.L.R.B. No. 186 (Aug. 27, 2015); for more information, see Legal Update, NLRB Issues New Joint Employer Standard, Blends Economic Realities Elements into Control Test).
The putative joint employer, Browning-Ferris, filed a petition for review with the DC Circuit. The NLRB cross petitioned for enforcement of the order against Browning-Ferris and separately applied for enforcement against Leadpoint Business Services.

Outcome

The DC Circuit panel majority held:
  • The NLRB is not entitled to deference when interpreting common law agency principles. The court may review that analysis de novo.
  • The NLRB may and did reasonably conclude, consistent with common law agency principles, that the following factors are relevant when determining if a joint employer relationship exists:
    • whether a putative joint employer has reserved authority to control another entity's employees; and
    • whether a putative joint employer has indirect control over another entity's employees.
  • The NLRB failed to include in its analysis of the indirect control factor the limits of common law agency principles. The NLRB did not distinguish:
    • indirect control that the common law of agency considers intrinsic to ordinary third-party contracting relationships, such as use of a "cost-plus contract," a frequent feature of third-party contracting and sub-contracting relationships; and
    • indirect control over the essential terms and conditions of employment, such as wages and hours. The NLRB appeared to erroneously consider routine contract terms such as a general cap on contract costs and a generalized description of the tasks to be performed under the contract as implicating essential employment terms and conditions rather than, as they ordinarily would be, routine aspects of company-to-company contracting.
  • The NLRB failed to explain how it would determine "whether the putative joint employer possesses sufficient control over employees' essential terms and conditions of employment to permit meaningful collective bargaining," the second step in its joint employer analysis after it reviews the common law factors. The NLRB neither:
    • identified "essential" employment terms and conditions; nor
    • clarified what entails "meaningful collective bargaining" or how parties are to engage in collective bargaining in this case.
The DC Circuit majority also noted that:
  • Because the NLRB relied on evidence that Browning-Ferris both had a right to control and exercised that control, this case does not present the question whether an unexercised right to control alone could establish a joint employer relationship.
  • It was premature for the DC Circuit to address Browning-Ferris's challenge to the NLRB's retroactive application of its new joint employer analysis without knowing the finer details of the test that the NLRB might supply on remand. However, the court instructed that the NLRB recognize that a retroactive application may be appropriate for new applications of existing law, but it may be unwarranted or unjust when there is a substitution of new law for old law, if the old law:
    • were reasonably clear; and
    • may have been relied on by entities in organizing their business relationships.
    (Epilepsy Found. of Ne. Ohio v. NLRB, 268 F.3d 1095, 1102 (D.C. Cir. 2001).)
The DC Circuit granted the petition for review in part and denied the cross-application for enforcement. The court dismissed without prejudice the application for enforcement as to Leadpoint and remanded the case to the NLRB for further proceedings consistent with its opinion.
In a dissenting opinion, Judge Randolph asserted that:
  • The majority should not have issued any merits opinion in light of the NLRB's pending rulemaking proceedings.
  • The majority opinion:
    • misstated the common law;
    • misconstrued the questions presented in the case; and
    • added more uncertainty to the NLRB's joint employer analysis.
The opinion and remand put the refinement of the joint employer standard under the NLRA back in the NLRB's hands, now with different potential tracks:
As dissenting Judge Randolph asserts, the opinion in this case has the potential for complicating the NLRB's rulemaking, especially since it undercuts potential deference to the NLRB's interpretation of common law agency principles, to the extent the NLRB intends to interpret and apply those principles as a foundation for its rule-based joint employer standard.

Update

On remand from the DC Circuit, the NLRB recognized that the new joint-employer test announced in the underlying Browning-Ferris representation case should not have been applied to the parties in that litigation to determine whether BFI was a joint employer. The regional director who dismissed Browning-Ferris from the representation case properly applied the extant precedent to find that Browning-Ferris did not jointly employ Leadpoint's employees. The NLRB further recognized that Browning-Ferris should not have been held to have an obligation to bargain as to those employees or to have violated the NLRA for refusing to bargain.
Accordingly, the NLRB:
  • Dismissed the unfair labor practice (ULP) complaint against Browning-Ferris.
  • Vacated the decision and order in that ULP case.
  • Reopened the Certification of Representative from the underlying representation case to reflect that the bargaining unit is comprised of employees employed by Leadpoint, rather than employees employed jointly by Leadpoint and Browning-Ferris.
(Browning-Ferris Indus. of Cal., Inc., 369 N.L.R.B. No. 139 (July 29, 2020).)

UPDATE

On February 11, 2021, the NLRB issued an order denying reconsideration of its July 29, 2020 decision and order. Chairman McFerran dissented. (Browning-Ferris Indus. of Cal., Inc., 370 N.L.R.B. No. 86 (Feb. 11, 2021).)

UPDATE

On July 29, 2022, in Sanitary Truck Drivers and Helpers Local 350 v. NLRB, the DC Circuit granted the union’s petition for review and vacated the Board’s Supplemental Decision and Order and Order Denying the union’s Motion for Reconsideration (see 369 N.L.R.B. No. 139 (July 29, 2020); 370 N.L.R.B. No. 86 (Feb. 11, 2021)). The DC Circuit remanded the case to the Board to conform its application of the Board’s 2015 joint-employer analysis in this case to common law principles flagged in the DC Circuit’s 2018 decision, which also remand this matter to the Board. The decision does not affect the Board’s 2020 joint employer standard set through agency rulemaking (see Legal Update, NLRB Issue Joint Employer Rule; 29 C.F.R. § 103.40). (, at *1 (D.C. Cir. July 29, 2022).)