Who’s the boss? That’s not often a difficult question to answer. But thanks to the National Labor Relations Board (NLRB), it’s no longer so easy. The NLRB’s recent decision in Browning-Ferris Industries overturned three decades of precedent for determining who can constitute a joint employment situation—where a party other than the direct employer of a group of workers exercises control over those workers. In doing so, the Board threw a wide variety of employment arrangements into uncertainty, including franchising, contracting, and temporary employment.
The Browning-Ferris decision threatens to be economically damaging, and deserves attention from Congress. Today, Sen. Lamar Alexander (R-Tenn.) and Rep. John Kline (R-Minn.) introduced the Protecting Local Business Opportunity Act to restore the joint employer standard that had prevailed for three decades before the NRLB unilaterally and without any compelling reason—other than to give unions bigger targets to organize—overturned it on August 27.
Under the new standard, the Board’s majority held that a business need not prove actual or exercised control, but merely the potential for control, to qualify as a joint employer. Under the old standard, control needed to be direct and exercised; under the new standard, it no longer need be. Widely broadening the criteria of what may constitute a joint employment situation threatens to potentially ensnare businesses all across the nation in labor relationships they never expected to be in, and liable for employees they didn’t know they had.
How far-reaching is the NLRB’s decision? To get an idea, some highlights of the dissent by Board members Harry I. Johnson (whose term expired the day of the decision) and Philip A. Miscimarra:
The majority fails to mention that in many of the cited cases there was evidence that the contractual rights were exercised, and there was other evidence of direct control over employees’ work. The majority’s statement also fails to account for all the Board cases that reach the contrary result with similar contractual provisions. Thus, we can paraphrase the majority’s statement, with appropriate citations, that during the period preceding TLI and Laerco [the two cases that set the standard the Board overturned on August 27], the Board found no joint-employer status where putative “employers retained the contractual power to reject or terminate workers; set wage rates; set working hours; approve overtime; determine ‘the manner and method of work performance’; ‘inspect and approve work,’ and terminate the contractual agreement itself at will.” Additionally, prior to TLI and Laerco the Board found that employers who conferred over the number of employees needed and the hours to be worked were not joint employers. (Page 32)
The dissent also notes that the majority appears to be reviving an old joint employer standard set in the 1944 Supreme Court decision NLRB v. Hearst Publications that has since been rejected by Congress. What makes Hearst so attractive to the Board? The majority opinion is quite forthcoming in that regard:
In Hearst, the Court interpreted the Act to include “employees (who) are at times brought into an economic relationship with employers who are not their employers”; to “reject conventional limitations” in defining an employee or employer; and to intend that those definitions lied “broadly … by underlying economic facts.” (Page 17)
Is that broad enough? In policy making, specificity is a virtue, but the NLRB’s majority in Browning-Ferris seems to disagree so strongly as to seek to revive a decades-old standard—and even circumvent Congress to do so.
As Miscimarra and Johnson further note, the majority “have announced a new test of joint-employer status that, notwithstanding their adamant disclaimers, effectively resurrects and relies, at least in substantial part, on intertwined theories of ‘economic realities’ and ‘statutory purpose’ endorsed by the Supreme Court in NLRB v. Hearst Publications, 322 U.S. 111 (1944), which Congress expressed rejected in the Taft-Hartley Amendments of 1947.” (Page 26) [Emphasis added]
Therefore, Miscimarra and Johnson note:
The majority’s explication of its new joint-employer test erases any doubt that the test is the analytical stepchild of Hearst, rather than being founded in common law. Our colleagues posit that as a first step they must determine whether an employment relationship exists at all between the alleged joint employer and an employee. Here, the majority does no more than acknowledge the obvious: an entity with no control whatsoever over a person performing services in that entity’s affairs cannot be that person’s employer. But the majority incorrectly sets this “zero control” state as the outer limit of common law master-servant agency, that is, if there is some control over any aspect of the performance of services, then common law would allegedly permit finding an employment relationship. Of course, if that were true, it would obliterate the common-law concept of an independent contractor and erase the distinction at common law between servant and nonemployee agent. The majority seems vaguely to recognize this, but as far as deciding whether it should find that a separate business is a joint employer with an undisputed employer of an undisputed employee, the majority nevertheless looks to whether it would serve the purposes of the Act to expand the joint-employer definition to serve the Act’s policy of “encouraging the practice and procedure of collective bargaining” (in the words of Sec. 1). (Page 31)
Indeed, the majority acknowledges that its decision to change the definition of joint employment is to facilitate collective bargaining, which is a state objective of the National Labor Relations Act. However, by adopting so broad and uncertain a standard, the NLRB has expanded that objective as well, to one of encouraging collective bargaining at all costs.
See my colleague Trey Kovacs’s statement on the legislation here.