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CEI: Heavily Scrutinized NLRB Joint Employer Standard Heads to Court

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Most people can pretty easily tell you who their boss is, but the Obama administration has made that a difficult question. In a decision last summer involving the waste management company Browning-Ferris Industries, the National Labor Relations Board (NLRB) overturned 30-year old precedent that determines when a “joint employment” relationship exists.

Since the 1980s, a company assumed joint employer liability—responsible for labor violations committed by an employer they contract with—when they directly controlled the terms and conditions of workers at another business. In the Browning-Ferris case, the NLRB redefined when a joint employer relationship can be established so greatly that they do not need “any evidence of direct or immediate control” and “indirect control or even an unexercised potential right to control key employment terms alone” may result in joint employer status.

Needless to say, the new joint employer standard throws a wrench into common business-to-business relationships, which companies utilize in order to focus on core functions and achieve greater productivity and efficiency.

However, it is possible the NLRB’s attempt to hold companies accountable for actions they did not commit may not last long. On June 7, Browning-Ferris Industries filed its opening brief against the Board’s new joint employer standard in the U.S. Court of Appeals for the D.C. Circuit. In the brief, Browning-Ferris presented a number of positions that argue the NLRB’s new joint employer test “fails as a matter of law.” Below are the arguments:

1. Whether the Board’s new joint-employer test fails as a matter of law because:

a. It is contrary to the employment relationships recognized by Congress in the 1947 Taft-Hartley amendments to the National Labor Relations Act;

b. It relies upon the kind of assessment of “economic realities” prohibited in the Taft-Hartley amendments;

c. It fails to promote stable collective bargaining relationships as required by the NLRA.

2. Whether the NLRB’s new test is arbitrary and capricious because it overturns decades of settled law and imposes a joint-employer definition so broad; and unconstitutionally vague that it is impossible for parties to arrange their affairs to achieve predictable legal outcomes.

3. Whether Browning-Ferris is a joint employer under either the longstanding test the Board abandoned in this case or its new test.

4. If the Board’s new test is valid, whether it is equitable to retroactively apply its reversal of 30 years of precedent to Browning-Ferris.

Points (a) and (b) are seemingly the most persuasive arguments and expose the blatant overreach of the NLRB members. In 1947, in response to a U.S. Supreme Court decision that broadened the meaning of an employer-employee relationship, Congress passed the Taft-Hartley amendments that reformed the National Labor Relations Act. Of the revisions to the NLRA, modifications to terms “employer” and “employee” were made so that direct and immediate control is what established an employment relationship, not “economic realities,” or any other broader test than used under common law.

Congress, in 1947, stressed that “direct supervision” is required to establish an employment relationship. Further, Browning-Ferris argues that even the “Court’s analysis of employment relationships under the NLRA, which has emphasized the importance of direct and immediate control over key employment terms.” It is easy to see how the new joint employer standard, which includes indirect control, is inconsistent with the NLRA and Taft-Hartley amendments.

It is crucial that the Court’s overturn the NLRB’s new joint employer standard, which flies in the face of the “finding and policies” of the NLRA, which declares as policy to remove obstructions to the free flow of commerce. The new NLRB test is so vague that it makes it impossible for business to know when they are viewed as joint employers and assume greater liability for actions not under their control. This potentially imposes a severe chilling effect on what contracts employers are willing to engage in that could significantly impact the free flow of commerce.

Without judicial intervention, many entrepreneurs might never get their start because a large business may view it as unwise to use their services with the potential of establishing joint employer status and the increased liability that comes with it. Fewer entrepreneurs and small businesses could dramatically stunt a large source of job creation, with small businesses creating 66 percent of new jobs since the 1970’s.

With meager GDP growth, over 94 million workers out of the labor force, and the fact that “40 percent of unemployed workers say they have ‘completely given up,’” it is perplexing that the NLRB is manipulating the law in such a way as to discourage business formation and job creation.

Originally posted to the Coalition to Save Local Businesses.