Who’s Up First in Joint Employment Debate?

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By Lawrence E. Dubé

Nov. 29 — Business advocates are hopeful in the wake of a Trump victory that the new year will bring an important change in how joint employment is determined under federal labor law. But it’s unclear who will have the first word on the subject: the president-elect’s new administration, Congress or the courts.

The business community sees an opportunity to roll back a National Labor Relations Board ruling it considers a threat to American franchise businesses, Matthew Haller, a senior vice president at the International Franchise Association, told Bloomberg BNA in a recent interview.

However, Daniel B. Pasternak, a partner who represents employers at Squire Patton Boggs in Phoenix, said a federal court in Washington may weigh in on the issue before Trump appointees even join the NLRB. There are “a lot of moving pieces” in the debate over joint employer standards, he said.

Haller said IFA also will move early in the new Congress for legislation on the joint employer question, but the group recognizes it will have to wage a long-term battle against a change in legal principles that could “metastasize” outside the NLRB and across the country.

Franchising companies, construction firms and other industries want a clear distinction between what constitutes a joint employer versus an independent company that operates as a contractor, partner or joint venture.

Why Joint Employment Status Matters

Classifying two or more businesses as joint employers can be critical to employers, unions and employees. A joint employer is liable under the National Labor Relations Act, and other federal and state laws, for unfair labor practices committed by its co-employer.

Companies in a joint employer relationship under the NLRA also may find that employees on the separate payrolls of each company or franchisee can be organized by unions and combined into a single unit for collective bargaining.

Additionally, companies that have claimed the status of “neutral” entities in a labor-management dispute may find themselves exposed to union pressures, including strikes and picketing, if the NLRB or a court determines that a joint employer relationship compromised the neutrality of the co-employer.

Labor Board Adopted New Standard in 2015

A firestorm of debate about joint employer issues was set off in 2015 when the NLRB issued a 3-2 decision in Browning-Ferris Industries of California, Inc., 362 N.L.R.B. No. 186, 204 LRRM 1154 (2015).

The board held that a recycling plant operator and a staffing company could be considered joint employers because they shared or codetermined matters governing the essential employment terms and conditions of workers provided by the staffing company.

One organization retaining indirect control over an employment relationship may be sufficient to show joint employer status even if the control hasn’t been exercised, the board said in Browning-Ferris.

Industry groups opposed the NLRB’s new standard, which reversed its 30-year-old “direct control” standard. IFA and other business associations argued that the board ruling poses a threat to American business franchising.

Trump Will Have Two Early Appointments to Board

President-elect Trump is about to inherit an NLRB with two of five seats now vacant.

Backed by a Republican Senate majority in the new Congress, Trump could fill the vacant seats with Republicans and give the board a 3-2 GOP majority in 2017.

Two of the five members in the 3-2 Browning-Ferris decision are no longer on the board: Kent Y. Hirozawa (D), who voted with the majority, and Harry I. Johnson (R), who joined in a lengthy dissent.

A Republican-controlled board then could turn the joint employer standard back to a more restrictive formulation. But it could take some time for that to happen.

Administrative Change Would Still Take Months

The new president can nominate board members immediately after he’s inaugurated, although there’s no guarantee they would win quick Senate confirmation.

Trump will have the Senate votes for confirmation of his nominees. But Democrats can try to slow the process of filling the NLRB’s vacant seats, which may not be a high priority for either the Senate or the new president early in 2017.

Even with new members confirmed, the board wouldn’t be able to simply announce a change in joint employer principles. The board would have to wait to incorporate a new standard in a ruling on an unfair labor practice or union representation case that came up on its docket.

Unfair labor practice cases often take months to progress through the NLRB’s administrative process. A representation case could get board consideration sooner, but it would still take at least several months.

Court Challenge Already Under Way

That means a federal appeals court one block from the U.S. Capitol may hear the issue first.

The U.S. Court of Appeals for the District of Columbia Circuit will have the first word on the controversy, Pasternak with Squire Patton Boggs told Bloomberg BNA.

Browning-Ferris Industries is challenging the NLRB’s joint employer theory, and briefs have been filed in the court proceeding.

Oral arguments are expected to take place early in 2017. Pasternak estimated that the court could rule within three to six months after the argument.

Browning-Ferris and a number of organizations that supported the company with amicus briefs argued forcefully that the board standard adopted for joint employer cases is inappropriate and should be reversed. But the outcome of the appeal is not guaranteed.

The D.C. Circuit hasn’t announced which judges will sit on the three-judge panel hearing the case. That assignment could be important to the outcome, Paul Secunda, a labor law professor at Marquette University Law School, told Bloomberg BNA.

The D.C. Circuit now includes several Obama appointees who may be prepared to defer the agency’s interpretation of what constitutes a joint employer under the federal statute.

In the event of a possible remand to the NLRB, it would be important for Browning-Ferris and its allies that new Republican board members be installed at the agency so they could participate in, and perhaps control, renewed consideration of the case, Gerald F. Lutkus told Bloomberg BNA. Lutkus is a partner at Barnes & Thornburg in South Bend, Ind., where he represents management in the firm's labor and employment department.

Legislative Push Could Outpace Litigation

Although Congress is often accused of slow action, legislation may offer the fastest route to relief for opponents of the Browning-Ferris ruling.

Haller told Bloomberg BNA that the International Franchise Association will push the next Congress to advocate for legislation to codify the “direct control” standard of joint employer liability that the NLRB abandoned in Browning-Ferris.

Proposed legislation also may address the question of joint employer status under other federal laws, the IFA executive said.

Haller said it’s important to IFA and its members to quickly restore certainty about the legal responsibilities of franchisers and franchisees and stability in their business relationships.

He hopes legislation can be enacted as soon as possible in 2017.

IFA’s goal is not to prohibit agencies and courts from finding companies to be joint employers where they share direct and immediate control over employees, Haller said. But the association is determined to oppose the NLRB’s Browning-Ferris ruling and the “very dangerous” push to classify business entities as joint employers that could spread from the NLRB to other federal agencies and to state governments.

People may see the question of joint employer status in a different “frame” after the election of a new president, but IFA will have a long fight to oppose the expansion of joint employer liability, he said.

To contact the reporter on this story: Lawrence E. Dubé in Washington at ldube@bna.com

To contact the editors responsible for this story: Peggy Aulino at maulino@bna.com; Terence Hyland at thyland@bna.com

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