November 02, 2015

Early Returns: Browning-Ferris and the Expanding Employment Relationship

On August 27, 2015, the National Labor Relations Board (NLRB) issued its decision in Browning-Ferris Industries of California, 362 NLRB No. 186, reworking the standard for joint employment under the National Labor Relations Act (NLRA). Browning-Ferris dramatically departs from decades of NLRB precedent. Not surprisingly, it immediately generated substantial commentary. Two months later, we revisit the decision, take stock of the early returns, and discuss the expanding employment relationship.

Summary of the Browning-Ferris Decision

Prior commentators have thoroughly analyzed the Browning-Ferris decision itself. See, e.g., FaegreBD’s initial coverage in "NLRB Dramatically Expands Joint Employer Standard in Browning-Ferris Industries of California, Inc." In short, the decision upended years of NLRB precedent on the standards governing joint employment. Previously, joint employment required an actual exercise of direct and immediate control over workers. In Browning-Ferris, the NLRB found that the old standard was narrower than the law requires, and it announced a new standard. Now, joint employment may exist where the entity in question has indirect control over the workers, or even where the entity has the right to control the workers, regardless of whether it actually exercises that right.

Though limited to the facts of the decision itself (a staffing agency providing workers under a temporary labor services agreement), Browning-Ferris could have wide-ranging effects. The dissent warned that the new standards "will subject countless entities to unprecedented new joint-bargaining obligations that most do not even know they have, to potential joint liability for unfair labor practices and breaches of collective-bargaining agreements, and to economic protest activity, including what have heretofore been unlawful secondary strikes, boycotts, and picketing." As discussed below, the Browning-Ferris framework may also bleed into related employment issues policed by the Department of Labor (DOL) and Equal Employment Opportunity Commission (EEOC).

Legislative Reaction

On September 9, 2015, Congressional Republicans introduced the Protecting Local Business Opportunity Act., H.B. 3459 and S. 2015. The House and Senate bills are identical and seek to overturn the Browning-Ferris decision by amending the NLRA. Under the new bills, "two or more employers may be considered joint employers for purposes of [the NLRA] only if each shares and exercise control over essential terms and conditions of employment and such control over these matters is actual, direct, and immediate." So far, the bill has had one hearing in the House and is supported by business groups, including the U.S. Chamber of Commerce.

In a related vein, although they cannot affect the NLRA, some state legislatures moved to address Browning-Ferris even before the decision was issued. (The NLRB’s General Counsel previewed the change in its briefing on Browning-Ferris.) To date, Texas, Tennessee and Louisiana passed laws clarifying that, under each state’s respective laws, employees of franchisees generally are not employees of franchisors, as reported by Law360 in "States Come Out Swinging Against New Joint-Employer Test," on September 22, 2015.

Judicial Attention

Both because it is such a change and because it is relatively thin on details, we expect that Browning-Ferris will generate a body of judicial interpretation in the coming months and years. At present, Browning-Ferris has been cited by only one court decision: Nardi v. ALG Worldwide Logistics & Transport Leasing Contract, Inc., --- F. Supp. 3d ---, 2015 WL 5462101 (N.D. Ill. Sept. 16, 2015). In its summary-judgment order dismissing Title VII claims, the court considered whether joint employment should be determined under the "economic realities" test used in Title VII cases (the plaintiff’s argument) or, as the defendant argued, under the joint-employer test from labor law. The briefing was complete before Browning-Ferris, but the court cited Browning-Ferris as "expand[ing] the circumstances" in which the joint-employment test is met. Nardi is interesting because, even with the context of the NLRB’s expanded standards, the court nonetheless found "no significant difference between the test articulated in labor law cases and the test that appears in employment discrimination cases[.]" Nardi eliminates any doubt about whether the Browning-Ferris standards, including the mere right to control, will make at least some movement from labor law to other areas of employment law.

The DOL and the EEOC

There is some indication that Browning-Ferris is part of a unified – or at least consistent – approach among multiple federal agencies, including the EEOC and the DOL. For example, the day before Browning-Ferris came down, Politico reported about a leaked memo from the Occupational Health and Safety Administration (OSHA), an agency of the DOL. The memo provides guidance to OSHA inspectors about assessing joint-employer relationships using the same indirect-control test as Browning-Ferris. The memo is only a draft, but it has gotten enough attention to be part of a Senate hearing, where the OSHA witness testified that OSHA investigators need to understand who is responsible for workers’ safety.

Looking Ahead

We have yet to see exactly how Browning-Ferris will impact businesses, but developments almost certainly are forthcoming. For example, McDonald’s is currently battling the NLRB about whether it is a joint employer of its franchisees’ employees and the NLRB’s decision on that question is hotly anticipated. Other companies face related challenges. In September 2015, the U.S. District Court for the Northern District of California certified a class of Uber drivers based on California state law. The case did not cite Browning-Ferris, but – especially considering the apparent triple-barrel approach of the NLRB, DOL and EEOC – we expect to see increasing numbers of workers’ lawyers arguing that joint employment is triggered by the mere right to control, divorced from direct or actual control.

Businesses associated with non-employee workers also should carefully analyze how they might be affected by the expanding employment relationship. A thorough review of staffing arrangements, independent-contractor agreements and franchise agreements is a prudent step in reducing the chance that apparently separate businesses will be treated as joint employers for new groups of workers.

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