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The National Labor Relations Board could run into problems in court if it relies on anecdotal evidence to support its plan to change the legal test for “joint employment” liability under federal labor law, legal scholars told Bloomberg Law.
The NLRB is collecting public comments on its proposal for a narrower, more business-friendly standard for determining when a company is a joint employer of another’s workers. Such a determination can be a critical issue for franchisers and companies that rely on contract labor. McDonald’s, for example, is fighting a complaint that it should share legal responsibility for alleged unfair labor practices because it exercises sufficient control over franchisees.
Public comments on the board’s proposal, together with the agency’s responses and other information, will make up the rulemaking record that a court would examine should the finalized regulation face a legal challenge.
NLRB Chairman John Ring told Bloomberg Law he foresees testimonials from businesses explaining their experiences with the current standard as part of the evidence supporting the proposed changes. The standard is confusing, Ring said, making it difficult for companies to operate and hampering their ability to create jobs.
The potential for a judge to invalidate the NLRB’s forthcoming joint employment regulation represents a major risk the agency accepted when it started a rare rulemaking rather than decide the issue through a case decision. The NLRB over the past three decades has issued only three substantive regulations, two of which survived judicial review.
The NLRB’s Republican majority had overturned the Obama-era standard for joint employment, created in the 2015 ruling in Browning-Ferris Industries. That ruling came in Hy-Brand Industrial Contractors in December 2017. But the board had to scrap Hy-Brand two months later because of an ethics issue with one of the members.
The NLRB will likely have to defend any final rule against a lawsuit brought under the Administrative Procedure Act, the federal law that spells out the process for creating regulations. Courts that hear APA challenges must decide whether a rule is reasonable based on the record the agency presents, according to legal scholars.
If the NLRB relies on anecdotal evidence, then it would have to explain why it did so, why it believed that people’s individual accounts justified changing the joint employment standard, and why it credited some testimonies over others, Sidney Shapiro, an administrative law professor at Wake Forest University, told Bloomberg Law.
“That may not be good enough,” Shapiro said. “You don’t need quantitative evidence, but if you’re going to change the standard, you have to have some evidentiary basis.”
The threshold for convincing a judge that a rule is reasonable varies, with some jurists more demanding than others, said Aaron Saiger, an administrative law professor at Fordham University. When defending a rule, agencies would generally rather have quantitative over qualitative evidence, many examples over few, and high-quality research over lower-quality studies, Saiger told Bloomberg Law.
A judge might be interested in more rigorous statistical analysis if there are testimonials from unions or other commenters that counter anecdotes supporting the NLRB’s proposed change to the joint employment standard, Jeffrey Lubbers, an administrative law professor at American University, told Bloomberg Law.
The NLRB, however, is limited in what evidence it can offer itself, because of the National Labor Relations Act’s prohibition on the agency hiring economists.
In light of that ban, organizations that advocate for employers and for workers will likely submit dueling analyses based on information they’ve gathered themselves or is available in the public record, Charlotte Garden, a Seattle University law professor who’s written on NLRB rulemaking, told Bloomberg Law.
Congressional Democrats already attempted to obtain evidence illustrating the effects of the current joint employment test when they asked the NLRB for detailed case information in joint employer cases. The board responded with a generalized lists of cases that simply included the term “joint employer.” A Democratic aide deemed the board’s reply “non-responsive.”
Ring told the Democrats that the NLRB’s internal case management system has limitations on how cases can be searched. In a subsequent tweet, Ring said the agency would have given the same case information if it had been requested by subpoena. “We can’t provide info we don’t possess,” he said.
But a Democratic House staffer told Bloomberg Law that the NLRB has more detailed case information that could be obtained by doing more than entering a few search terms into its case management system. Although it might take time and effort to pull up the relevant cases and find the information from documents, failure to do so might raise concerns that the board is rushing to finalize a rule without doing the necessary due diligence, the staffer said.
Not obtaining case information could come back to haunt the NLRB. Under the “hard look” doctrine, an agency must show the connection between the facts and the conclusions it reached during rulemaking, said Shapiro, the Wake Forest University law professor.
“Generally, when an agency ignores a potential source of information which is relevant to the policy decision it’s making, then courts will send the rule back and say, ‘What about this information?’” Shapiro said.
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