Labor Board Ethics Drama Sends Big Case Back to Court (2)

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By Chris Opfer and Hassan A. Kanu

An appeals court in Washington won’t decide what to do with a controversial case that has big stakes for franchise and other businesses until the National Labor Relations Board resolves a related dispute clouded by ethics concerns.

The case, Browning-Ferris Industries, centers on one of the most contentious labor law questions in recent years: When can one business be considered a “joint employer” of another’s workers? The NLRB in the recent Hy-Brand Industrial Contractors case changed its answer to that question. Then the board promptly scrapped its Hy-Brand decision because of conflicts-of-interest concerns dogging one it the decisonmakers in that case, board member William Emanuel (R).

The U.S. District Court for the District of Columbia said late April 6 that it’s taking back from the board the Browning-Ferris case based on “extraordinary circumstances.” But the judges also said they’ll wait to see how the NLRB handles a request to reconsider Hy-Brand before taking up Browning-Ferris..

A Democrat-majority NLRB in 2015 used the Browning-Ferris case to expand joint employer liability to include situations where a business has only indirect control over workers hired by staffing agencies or franchisees. If upheld, that decision could affect McDonalds and other large franchisers that require franchisees to follow a wide range of policies to maintain brand uniformity. It could also make companies that use staffing agencies joint employers of workers provided by those firms.

“It’s an enormous deal that’s very far reaching,” Peter Schaumber, a former Republican NLRB member told Bloomberg Law of the joint employment issue. “It impacts franchises, the staffing industry, and the hundreds of thousands of businesses that have been established to provide a service to another company.”

The Browning-Ferris decision was still on appeal when a new, Republican-majority reverted to the old “direct control” standard in Hy-Brand. That standard is considered more business friendly and less likely to tie companies up as joint employers than the “indirect control” approach.

The appeals court sent Browning-Ferris back to the NLRB without deciding on the case after the Hy-Brand decision.

Then NLRB Inspector General David Berry weighed in. Berry said Emanuel should have recused himself from the Hy-Brand case because his former law firm, Littler Mendelson, represented a staffing company in the Browning-Ferris case. Emanuel, who hired an attorney to defend him in the investigation, said his former firm’s involvement in Browning-Ferris doesn’t require him to sit out Hy-Brand and other joint employment cases.

Change Coming?

The board’s other three members—Chairman Marvin Kaplan (R), Lauren McFerran (D), and Mark Gaston Pearce (D)—dropped the Hy-Brand decision after Berry’s report. The company has asked the NLRB to reconsider the ruling.

That makes the Browning-Ferris approach to joint employment the law of the land, at least for now.

The reason laws even allow for joint employment “is because sometimes you need an additional employer to ensure compliance with basic protections for workers,” Catherine Ruckelshaus, general counsel for the National Employment Law Project, told Bloomberg Law. “In temp and staffing arrangements, which are on the rise, usually there is going to be shared control of the workers”

The appeals court’s move to take back Browning-Ferris came one day after NLRB General Counsel Peter Robb slammed the board for deciding to scrap the Hy-Brand decision without allowing Emanuel to participate or address the ethics concerns. Robb called the three-member ruling “unprecedented.”

Emanuel wants the White House counsel’s office to determine whether he breached an ethics pledge by participating in the earlier Hy-Brand decision.

The five-member board is currently locked in a 2-2 partisan split. The Senate is set to vote next week on management attorney John Ring’s nomination for the board’s fifth seat. Ring would give the board a Republican majority, but it’s not clear whether any of the three board members who decided to scrap the Hy-Brand decision are likely to change their minds.

Even if the court eventually affirms the Browning-Ferris decision, the new board would likely have the power to shift back to a more restricted joint employment test in another case. Still, NELP’s Ruckelshaus said the court could create a few speed bumps by upholding the decision.

“It puts more of an onus on the board to explain why in the span of a few years or so it’s flipping back to the previous test,” Ruckelshaus said.

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