NLRB: Browning-Ferris Shouldn’t Be Designated a Joint Employer

Allen Smith, J.D. By Allen Smith, J.D. August 10, 2020
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​The definition of "joint employer" has been in flux for the past few years and continues to change. In a July 29 decision, the National Labor Relations Board (NLRB) determined that a 2015 ruling that changed the agency's decades-old interpretation of "joint employer" should not apply retroactively to Browning-Ferris Industries.

The NLRB said retroactive application of the 2015 standard would be "manifestly unjust."

The definition of joint employer affects such determinations as which employees can unionize and who they can sue.

The recent decision "was a bit unusual, as the NLRB historically applies decisions that change the interpretation of federal labor law retroactively, even if retroactive application seems unjust under the circumstances," said Mark Keenan, an attorney with Barnes & Thornburg in Atlanta.

"Structuring relationships with other companies—such as temporary agencies, the crew who provides cleaning services, those who provide security support and those dedicated to make sure groundskeeping outside meets company standards—is tricky," said Michael Lotito, an attorney with Littler in San Francisco. "Positive employee relations have to be balanced against joint-employer concerns."

2015 Ruling

In 2015, the NLRB issued a new joint-employer standard in Browning-Ferris Industries, overruling cases holding that an entity must exercise direct and immediate control over the essential terms and conditions of employment of another entity's employees to be a joint employer under the National Labor Relations Act (NLRA).

The board held that indirect control or unexercised, contractually reserved control alone could be enough. The NLRB then applied its new joint-employer standard retroactively, concluding that Browning-Ferris Industries was a joint employer of Leadpoint Business Services' employees in a petitioned-for bargaining unit.

Subsequent Holdings

Browning-Ferris Industries refused to recognize and bargain with the union, and the NLRB subsequently found that this refusal violated the NLRA.

The company declined to comply with the board's order to bargain with the union, instead appealing to the U.S. Court of Appeals for the District of Columbia Circuit. In 2018, the appeals court ruled that unexercised reserved control and indirect control can be relevant factors in determining whether an additional entity is a joint employer. But the court did not address whether such evidence is conclusive.

The court also suggested that retroactive application of the new standard might be unfair.

Recent Decision

In its recent decision, the NLRB ruled that retroactive application in this case would be unfair. Browning-Ferris did not violate the NLRA by refusing to bargain with the union, the board decided.

While the board has an established presumption in representation cases to apply a new rule retroactively, it concluded that "any presumption favoring retroactive application in this case is significantly outweighed by its potential ill effects."

Retroactive application would mean that Browning-Ferris Industries and companies like it would suddenly face "unanticipated and unintended duties and liabilities," the NLRB stated.

NLRB Final Rule

In its decision, the board noted that it issued a final rule that reinstated and clarified the joint-employer standard that was in place prior to the 2015 Browning-Ferris Industries ruling. The final rule took effect April 28.

Under the final rule, an entity is a joint employer of a separate employer's workers only if the two employers share or co-determine the employees' essential terms or conditions of employment.

Even with the new rule, employers need to be careful not to inadvertently have direct control over other entities, said Harry Johnson III, an attorney with Morgan Lewis in Los Angeles and a former member of the NLRB.

DOL Final Rule

In addition to the NLRB's final rule, the U.S. Department of Labor (DOL) announced Jan. 12 a final rule narrowing the definition of joint employer under the Fair Labor Standards Act (FLSA) and providing clarity to businesses about franchise and contractor relationships.

On Feb. 26, New York Attorney General Letitia James and Pennsylvania Attorney General Josh Shapiro led a coalition of 18 attorneys general in filing a lawsuit to block the DOL's final rule. The new rule is incompatible with the text of the FLSA and congressional intent in passing it to protect workers, according to the plaintiffs.

The lawsuit was joined by California, Colorado, Delaware, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New Mexico, New Jersey, Oregon, Rhode Island, Vermont, Virginia, Washington state and Washington, D.C. A court ruled June 1 that the case may proceed.

[Need help with legal questions? Check out the new SHRM LegalNetwork.]

Joint-Employer Concerns

The definition of joint employer is an important legal concept, said Phillip Wilson, president and general counsel with Labor Relations Institute in Broken Arrow, Okla. If a company is a joint employer, it could be financially responsible for a contractor's violation of the NLRA or wage and hour laws. This "makes the advantages of the contract less valuable," he said.

Being a joint employer "means that your business is liable for mistakes made by another business—even if you had no control over that business's practices," said Todd Lebowitz, an attorney with BakerHostetler in Cleveland.

Wilson explained that contracting out can be "incredibly more efficient" because larger employers can "focus on the primary business while creating millions of jobs in smaller companies."

Joint employment also affects who employees bargain with. In Browning-Ferris Industries, the employees who voted in the election assumed that the employer was Leadpoint. Then the NLRB voted that the employer was a joint employer: Browning-Ferris Industries and Leadpoint. So if the decision applied retroactively, the employees would have been bargaining with an entity that was different from the one they had in mind, Wilson said.

He added that two different businesses may not want to bargain with a union at the same time because the companies may have different interests or approaches to labor relations.

Keenan concluded, "The joint-employer issue should remain on everyone's radar given the November elections."

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