Senators: Labor Board Uses Regulation to ‘Evade’ Ethics Issue (1)

From labor disputes cases to labor and employment publications, for your research, you’ll find solutions on Bloomberg Law®. Protect your clients by developing strategies based on Litigation...

By Hassan A. Kanu

Three lawmakers said to be considering a Democratic run for the White House told federal labor board Chairman John Ring (R) May 29 that they’re concerned the board is using the regulatory process to skirt conflict-of-interest issues and update its approach to joint employment to favor large corporations.

Sens. Elizabeth Warren (D-Mass.), Bernie Sanders (I-Vt.), and Kirsten Gillibrand (D-N.Y.) said the National Labor Relations Board’s plan to tackle joint employer liability via regulation appears to be a way to “evade the ethical restrictions” that apply to NLRB case decisions, according to a letter obtained by Bloomberg Law. The senators also foreshadowed a potential legal challenge to the eventual rule.

The NLRB held in a decision in December that one business has to exert direct control over another’s workers to be considered their joint employer for unionization purposes. The board scrapped that decision after the agency’s inspector general said Member William Emanuel (R) shouldn’t have participated because his former law firm was connected to the case.

That left in place a board decision issued when the NLRB was controlled by Democrats. That decision allows businesses in staffing, franchise, or other contractual relationships to be tagged as joint employers if they exert indirect control over another company’s workers.

Ring announced in April, weeks after he was sworn in, that the board would address the controversial issue again via regulation. That would be the third time the standard has changed during the Trump administration.

“There’s nothing inappropriate with the board considering rulemaking on the joint employer issue,” Jerry Hunter, a former Republican NLRB general counsel, told Bloomberg Law May 30. “I think the senators are incorrect in saying the rulemaking is somehow a guise, or scheme to get around adjudication where one member may have a conflict.”

Ring and the NLRB declined to comment on the matter.

‘Interesting’ Question

Wilma Liebman (D), a former NLRB chairwoman, said the board may want to consider the lawmakers’ gripes.

“I think the ethics/conflict of interest issue is an interesting one. If a member cannot participate in a case, can he participate in a rulemaking on the same subject?” Liebman said in an email to Bloomberg Law May 30. “I don’t know the answer, but it is surely an issue worthy of consideration. And one the Board should have to answer.”

The NLRB issued at least two new rules during Liebman’s tenure as a board member, one of which was struck down by a federal court.

Hunter said regulations are different than case decisions because the board considers comments from the public and stakeholders as to how the rule should be structured, rather than the effects on any specific employer.

Broad Implications for Business

The board’s approach to the joint employer issue has significant implications for business and workers in franchise arrangements 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.

Supporters of expanded liability say it gives workers a path to remedies for labor law violations in situations in which there often aren’t any, while critics say it makes companies liable for other business’s workers.

The NLRB’s labor law interpretations tend to change along with a change in the presidential administration. The board traditionally sets standards by deciding individual cases, rather than issuing rules via the public-notice-and-comment process. Regulations are largely considered more difficult and time-consuming to enact but also harder for another administration to undo.

Samuel Estreicher, director of the labor and employment law center at New York University, told Bloomberg Law May 30 that there doesn’t seem to be any obvious ethical issues with the board’s latest move.

“There is a Republican majority and there’ll likely be a change in that rule,” Estreicher, who has long urged the board to consider more regulatory activity, said. “It’s just a question of when it’ll happen.”

“I think it brings the agency under a cloud when they reverse policies through adjudication. This is true whether the Democrats or Republicans are in the majority,” Estreicher said. “So if Ring’s initiative starts something new, I’d be in favor of it.”

Timing Concerns

Ring said in a tweet shortly after the announcing the new regulation that the NLRB’s Republican majority “intends to get the job done.”

“The joint-employer standard is one of the most critical issues in labor law today—affecting millions of Americans in nearly every sector of the economy,” Ring wrote. “Uncertainty over the standard undermines job creation & economic expansion.”

The Democrats said in the letter to Ring that those public comments show he has prejudged the issue and is set on returning to the “direct control” standard. They added that the timing of the announcement raises red flags and predicted a court battle.

“While there is nothing inherently suspect about an agency proceeding by rulemaking, it is impossible to ignore the timing of this announcement, which comes just a few months after the Board tried and failed” to establish a standard that would limit joint employer liability, the lawmakers wrote.

“The Board’s sudden announcement of rulemaking on the exact same topic suggests that it is driven to obtain the same outcome sought by Member Emanuel’s former employer and its clients, which the board failed to secure by adjudication.”

Warren, Sanders, and Gillibrand are among a field of potential candidates said to be considering a run for the Democratic presidential nomination in 2020. Sanders is an Independent who caucuses with the Democrats.

Request Labor & Employment on Bloomberg Law