United States: D.C. Circuit Upholds Joint Employer Rule, Leaves Room For Changes Through Rulemaking

The National Labor Relations Board's current joint employer standard received a mixed review from a federal circuit court late last month, providing some guidance on how courts may evaluate the Board's ongoing rulemaking efforts.

In general, joint employer status exists where two otherwise separate employers co-determine some or all of the terms and conditions of employment for the employees of one of the employers. This typically arises in a situation where one employer retains the other employer to provide business services.

In a 2-1 decision in Browning-Ferris Indus. Of Cal., Inc. v. NLRB, the U.S. Court of Appeals for the District of Columbia Circuit held that the joint employer test articulated in the Board's 2015 Browning-Ferris decision was lawful. Specifically, the Court upheld the new test developed by the Board, which considers both an employer's unexercised "right to control" and evidence of indirect control over employee terms and conditions of employment, in addition to the traditional consideration of active and direct control. The Court stated that the Board's consideration of the "right to control" and "indirect control" factors was consistent with common-law agency principles.

Notably, the D.C. Circuit was careful to limit the scope of its decision. The Court explicitly said it was not addressing the question of whether a "right to control" alone or indirect control alone could be dispositive to a joint employer finding. Instead, it merely held that such factors were relevant to the analysis, without making a judgment as to how much weight they should carry.

The Court reasoned that the Board was obligated to apply common-law agency principles when crafting its joint employer test because Congress intended common-law to govern the definitions of "employee" and "employer" under the NLRA. The Court then examined common-law agency and determined that both reserved control and indirect control were historically relevant to determination of an employee/employer relationship under the Act. Thus, the Board did not err by considering these types on control in its analysis.

Still, rather than uphold the decision entirely, the Court remanded the case to the Board to clarify the types of indirect control that factored into the Board's analysis. The Court distinguished between indirect control over an employee's essential terms and conditions of employment exercised through, e.g., an intermediary, and more attenuated indirect control that arises through routine aspects of business-to-business contracting. Because the Board had failed to distinguish between these two types of indirect control, the Court could not determine whether the Board's decision relied on the proper factors in determining that Browning-Ferris was a joint employer.

The decision is of particular interest because of the Board's ongoing rulemaking process regarding the standard to determine joint employer status. The proposed rule seeks to return the standard to more closely resemble its pre-Browning-Ferris test, which considered only actual and direct control. Although the dissenting judge in the case argued the Court should have withheld its decision until the Board completed the rulemaking process, the decision may help guide the Board to craft a judicially acceptable rule.

Importantly, the ruling appears to leave the Board with sufficient leeway in both crafting and justifying its proposed rule. The Court's holding that the Browning-Ferris standard was applied too vaguely arguably strengthens the Board's argument that rulemaking is necessary to provide stability and predictability to the rule. Further, the Court did not dictate the relative evidentiary weight to be given to indirect or reserved control, which will presumably allow the Board to draft a rule that fills in the gaps and brings the Board's unique labor policy expertise to bear in deciding how much weight should be given to these factors.

For now, the Board's Browning-Ferris test remains the law of the land, subject to further clarification from the Board on remand or in the rulemaking process.

[1] Browning Ferris Indus. of Cal., Inc. v. NLRB, No. 16-1028 (D.C. Cir. Dec. 28, 2018).

[2] Federal Register, The Standard for Determining Joint-Employer Status, 83 Fed. Reg. 46681, 46688-89 (Sept. 14, 2018) (to be codified at 29 C.F.R. 103).

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