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D.C. Circuit “Refines” the NLRB’s Joint Employer Test

In a 2-1 decision issued December 28, 2018, the United States Court of Appeals for the District of Columbia Circuit upheld the National Labor Relations Board’s (NLRB’s) determination that both an employer’s reserved authority to control and it’s indirect control can be relevant factors in the joint employer analysis. The Court, however, reversed the Board’s articulation and application of the indirect-control element of its joint employer test. See BFI v. NLRB, 2018 WL 6816542 (D.C. Cir. Dec. 28, 2018). [1]

The BFI decision resulted from the NLRB’s decision regarding a petition filed by a chapter of the International Brotherhood of Teamsters seeking to represent a new bargaining unit consisting of employees of “joint employers” working at the Newby Island Recyclery.  BFI Newby Island Recycling (BFI) operated the Newby Island Recyclery and entered into a Temporary Labor Services Agreement with Leadpoint, a staffing company, which provided approximately 240 workers at the facility. The NLRB determined that BFI and Leadpoint were joint employers.

In reviewing the NLRB’s decision, the Court first stressed the significance of joint employer status under the National Labor Relations Act (NLRA) and the lack of the NLRA’s direct guidance in the form of a relevant definition. The Court then discussed the history of the various tests that courts and the NLRB have applied to determine joint employer status.

The Court noted that, in making its decision, the NLRB stated the joint employer test as “including consideration of both an employer’s reserved right to control and its indirect control over employees’ terms and conditions of employment.” Although the Court affirmed the Board’s statement of the pertinent test, it reversed the Board because it failed to “distinguish evidence of indirect control that bears on a worker’s essential terms and conditions,” such as “disciplinary measures,” and “evidence that simply documents the routine parameters of company-to-company contracting,” such as “a very generalized cap on contract costs or an advance description of the tasks to be performed under the contract.” The Court concluded that “the Board overshot the common-law mark.”

The Dissent focused on the Board’s pending rulemaking proceedings to establish standards for determining joint employer status in determining that no merits-based opinion should have been issued. It added that the unexercised authority to control and the indirect control standard misconstrues the common law for purposes of expanding employer liability.

This decision may be of limited precedential value, however, as the NLRB published a Notice of Proposed Rulemaking on September 14, 2018, regarding its joint-employer standard. Under the proposed rule, an employer may be found to be a joint employer of another employer’s employees only if it possesses and exercises substantial, direct and immediate control over the essential terms and conditions of employment and has done so in a manner that is not limited and routine. The factors primarily focused on by the D.C. Circuit—indirect influence and contractual reservations of authority—would no longer be sufficient to establish a joint employer relationship.  The public comment period is currently set to expire on January 14, 2019.

Practical guidance

One important point to keep in mind is that a “joint employer” is simply an “employer”, with many of the same liabilities and obligations that any employer would have. Bottom line, you may have more “employees” than you think you have. If you have relationships with third parties where you are engaged with that entity’s workforce in the ways contemplated by this opinion, you will want to pay close attention to upcoming developments in this area. If you have concerns that you may be a “joint employer” of individuals who are not your direct employees, you should seek advice of experienced legal counsel.

Authored by: H. Rowan Leathers, III and Timothy W. Lindsay

[1] U.S. Court of Appeals for the District of Columbia Circuit, BFI v. NLRB, 2018 (D.C. Cir. Dec. 28, 2018)