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D.C. Circuit Weighs in on the NLRB’s Joint-Employer Standard

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Consider the following scenario: Your company uses a contractor staffing company to perform cleaning and maintenance tasks at one of its facilities. The contract with the staffing company allows your company to terminate the agreement with 30 days’ notice and makes it clear the staffing company is responsible for paying its employees. While working at your company, the employees at the staffing company vote to form a union. When it is time to bargain, they insist that your company — and not only the staffing company — must come to the bargaining table. You don’t see why your company should be involved in negotiations with someone else’s employees. Isn’t that the staffing company’s problem? Can your company be legally required to bargain with someone else’s employees?

Whether such a bargaining requirement can be ordered and in what circumstances has been a legal battleground before the National Labor Relations Board for the past seven years. Unfortunately, as the following description of the status of this case illustrates, the NLRB, with its shifting majority membership appointed by presidents from different parties, is not providing the clarity we all would hope to have, and the U.S. federal courts of appeal have not helped. Still lacking the clear rule from the NLRB, employers are left to consider the possibility of bargaining in the scenario we described above.

In a 2015 case involving Browning-Ferris, the NLRB, the majority of whom were appointed by President Obama, considered this issue and held that two or more employers can be joint employers of the same employees if they “share or codetermine those matters governing the essential terms and conditions of employment.” The NLRB went on to state that a key question is whether the putative joint employer possessed “sufficient control of the essential terms and conditions of employment to permit meaningful collective bargaining.” The Board made it clear that a joint employer did not necessarily have to exercise control in fact, so long as it retained the right to control. Browning-Ferris appealed, and in 2018, the D.C. Circuit held that “indirect control” over someone else’s employees could be sufficient to make Browning-Ferris a joint-employer. However, the D.C. Circuit remanded the case to the NLRB to provide a “blueprint for what counts as ‘indirect control’ over ‘essential terms and conditions of employment.’”

In 2020, the NLRB, with a majority of members appointed by President Trump, issued a final rule that significantly scaled back the 2015 holding in the Browning-Ferris precedent. Under this rule, a company would be considered a joint employer only if it actually possessed and exercised direct and immediate control on the other employer’s employees. Several months later, the NLRB issued a decision in response to the D.C. Circuit’s remand in which they ignored the Court’s request to provide a “blueprint” for what counts as “indirect control,” perhaps because they thought it was irrelevant in light of their new rule. Instead, the NLRB held that it would be “manifestly unjust” to retroactively hold Browning-Ferris liable as a joint employer under the 2015 case based on indirect control alone.

The D.C. Circuit was not amused. On July 29, 2022, the D.C. Circuit again reversed the NLRB, taking issue with the fact that it ignored the Court’s directive to provide a “blueprint” for what counts as “indirect control.” The Court also disagreed with the Board’s finding that Browning-Ferris could not be held liable retroactively, emphasizing that, prior to 2015, there had not been a “clear rule” requiring direct control to find joint employer status that Browning-Ferris may have relied on.

The D.C. Circuit concluded its opinion by noting that “[n]othing in today’s decision nullifies the essential principle that the National Labor Relations Board is free to change its mind. But the Board must acknowledge when it is doing so and explain its reasoning, and when defining joint-employer status, ‘it must color within the common lines identified by the judiciary.’” It’s no secret, of course, that the current (and more union-friendly) NLRB is in the process of developing its own joint employer rule, and one can assume that the drafters of this rule were comforted by the D.C. Circuit’s analysis although they would be well-advised to flesh out what they mean by “indirect control.”

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.