Antitrust Law Daily Browning-Ferris joint-employer test upheld, to some extent, on ‘indirect control’
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Thursday, January 3, 2019

Browning-Ferris joint-employer test upheld, to some extent, on ‘indirect control’

By Lisa Milam, J.D.

A divided D.C. Circuit panel has upheld the NLRB’s Browning-Ferris joint-employer standard—in particular, the consideration of a putative joint employer’s reserved right to control the workers in question, and the indirect control it exercises over those workers, as key factors to determine joint-employer status. These factors are rooted in the common law definition of "employer," the appeals court explained, affirming the Board’s joint-employer test (on de novo review) "as including consideration of both an employer’s reserved right to control and its indirect control over employees’ terms and conditions of employment." In short, "the Board’s conclusion that it need not avert its eyes from indicia of indirect control—including control that is filtered through an intermediary—is consonant with established common law. And that is the only question before this court." However, the NLRB did not sufficiently articulate "the scope of the indirect-control element’s operation," the appeals court said, remanding the case to allow the Board to more fully flesh out this aspect of its joint-employer analysis. Judge Randolph filed a separate dissenting opinion (Browning-Ferris Industries of California, Inc., dba BFI Newby Island Recycling, December 28, 2018, Millett, P.).

Joint-employer determination. The NLRA imposes obligations on employers to collectively bargain with representatives of employees. But how do those statutory obligations work when an employee has more than one putative employer? A Board order that an employer bargain with a union over the terms and conditions of employment may be futile if another entity, not subject to an order to bargain, exercises final say over a working condition or has power to override a choice negotiated in a collective bargaining agreement. The Board has long recognized that two entities may be joint employers under the NLRA. This case involves the standard that the Board applies in making that joint-employer determination.

Actual, direct control. For years, in analyzing joint-employer claims, the Board would rely only on evidence of (i) actual control, as opposed to the right to control, and (ii) direct and immediate control, not indirect control. The Board’s decision in this case changed both of these factors by making the right to control and indirect control relevant considerations in determining joint employer status.

On which facts did Board rely? Unfortunately, the appeals court could not discern what specific facts in the record proved dispositive to the Board in finding that Browning-Ferris was indeed a joint employer alongside Leadpoint, a staffing contractor that provides labor to Browning-Ferris, and it noted its concern that some of those facts relied on in the agency’s deliberations "veered beyond the orbit of the common law." Therefore, the D.C. Circuit granted the putative joint employer’s petition for review in part, and denied the Board’s cross-application for enforcement.

Indirect control is relevant. "This case decides only whether indirect control can be a relevant factor in identifying a joint employer." That’s how the majority framed the issue before it, answering in the affirmative. "A categorical rule against even considering indirect control—no matter how extensively the would-be employer exercises determinative or heavily influential pressure and control over all of a worker’s working conditions—would allow manipulated form to flout reality," the majority found.

What counts? However, in analyzing the factual record below, appeals court determined that the Board had "failed to differentiate between those aspects of indirect control relevant to status as an employer, and those quotidian aspects of common-law third-party contract relationships." The Board had "provided no blueprint for what counts as ‘indirect’ control." So the appeals court remanded to the Board for further proceedings.

Rulemaking didn’t moot the point. The Trump NLRB had already largely denounced the Obama-era Browning-Ferris ruling, and it attempted to undue the controversial decision through its ill-fated 2017 opinion in Hy-Brand Industrial Contractors, Ltd. But Hy-Brand was vacated due to a rather confounding turn of events: The NLRB’s inspector general determined that Board Member William Emanuel, whose previous firm had represented Leadpoint in the Browning-Ferris proceedings, ought to have recused himself from the case that would reverse it. So, on May 9, 2018, the Board announced it would undertake formal rulemaking to articulate a joint-employer standard—one that would essentially revert to a pre-Browning-Ferris test.

That didn’t moot this case, though, as the Board was quite emphatic that it wanted the D.C. Circuit to decide the pending petitions for review nonetheless. In June 2018, the NLRB expressly asked the appeals court to proceed despite having announced its intentions to promulgate a rule, the appeals court noted, and the Board did so again even after publishing its proposed rule in September 2018.

It’s the judiciary’s job to define employer. But the Browning-Ferris ball was rightly in the D.C. Circuit’s court anyway, the majority said, because it was the courts, and not the Board, that were tasked with defining "employer" under the common law—and the common law definition was implicated by the Board’s joint-employer test, both as set forth in the case at hand and in the Board’s prospective final rule to come. The Board’s rule, the appeals court advised, "must color within the common-law lines identified by the judiciary." (The dissent urged the court to wait, but "we see no point to waiting for the Board to take the first bite of an apple that is outside of its orchard," the majority countered).

Other points. A few other point-of-law takeaways:

  • The Board hadn’t finished the job. There was a second component to its stated joint-employer test, one which was overlooked below. The NLRB had said that even if an entity were likely a joint employer under the common law, the Board would not deem them a joint employer under the NLRA unless that entity had sufficient control over the terms and conditions of employment for the workers in question to an extent that would permit "meaningful collective bargaining." But the Board largely dodged this inquiry, simply stating that Browning-Ferris was only obligated to bargain "with respect to those terms and conditions over which it possesses sufficient control for bargaining to be meaningful."
  • Browning-Ferris had argued to no avail that the critical inquiry was whether the workers in question were independent contractors—a test that turned on "the extent of the actual supervision exercised." The independent contractor test was "virtually identical" on the joint employer question, the company asserted, so actual supervision should matter most when determining joint-employer status. On this point, the petitioner found cold comfort in Judge Randolph’s dissent, which agreed that Leadpoint’s independent contractor status resolved the matter. But "controlling precedent says otherwise," according to the majority, which soundly rejected the notion that these inquiries were one and the same, noting this contention "lacks any precedential grounding." As the court saw it, "using the independent-contractor test exclusively to answer the joint-employer question would be rather like using a hammer to drive in a screw: it only roughly assists the task because the hammer is designed for a different purpose."
  • In responding to the D.C. Circuit’s prodding that the Board had not sufficiently fleshed out the "indirect control" factors, the Board responded it would do so, per usual, through case-by-case adjudication. In theory, there was nothing wrong with this approach, the appeals court said—when interpreting the NLRA, of which the Board is charged with particular expertise. But "the Board has no administrative expertise when it comes to discerning the traditional common-law meaning of ‘employer,’" the court noted, so "that step-by-step approach depends on the Board starting with a correct articulation of the governing common-law test."
  • The D.C. Circuit tabled, for now, the question whether the Board’s retroactive application of its newly minted test was "manifestly unjust."

Meaningful collective bargaining. If the Board were to again find that Browning-Ferris is a joint employer of the Leadpoint workers under common law, the appeals court noted that it should not neglect to (i) apply the second half of its announced test, (ii) explain which terms and conditions are "essential" to permit "meaningful collective bargaining," and (iii) clarify what "meaningful collective bargaining" entails and how it works in this setting.

Which indirect control? In sum, the D.C. Circuit upheld as fully consistent with the common law the Board’s determination that both reserved authority to control and indirect control can be relevant factors in the joint employer analysis. Still, the appeals court granted Browning-Ferris’s petition for review in part. Specifically, the court reversed the Board’s articulation and application of the indirect control element in this case to the extent that it failed to distinguish between indirect control that the common law of agency considers intrinsic to ordinary third-party contracting relationships, and indirect control over the essential terms and conditions of employment.

With respect to Leadpoint, which made no appearance in the appeals court, the D.C. Circuit noted that the relief ordered by the Board was "inextricably bound up" in Leadpoint’s joint-employer status with Browning-Ferris, and so it dismissed the application for enforcement as to Leadpoint without prejudice as well.

Dissent. Judge Randolph filed a lengthy dissenting opinion arguing that the court should not have issued any merits opinion in light of the Board’s announcement that it intended to conduct rulemaking to establish standards for determining joint employer status.

Additionally, he dissented because, in his view, the majority misstated the common law, misframed the question in this case, and added to the uncertainty the Board’s Browning-Ferris decision has generated. Specifically, he observed that under common law, employees of a true independent contractor cannot be considered employees of the company who hired the contractor. According to the dissent, the majority’s opinion threatens to short-circuit the Board’s choice, to control and confine the scope of its rulemaking, and to influence the outcome of that proceeding. As to the merits, Judge Randolph relied on the opinions of the two dissenting Board members in Browning-Ferris and the Board majority in the Hy-Brand case.

The case is Nos. 16-1028, 16-1063, and 16-1064.

Attorneys: Joshua L. Ditelberg (Seyfarth Shaw) for Browning-Ferris Industries. Craig Becker (AFL-CIO) for Teamsters Local 350.

Companies: Browning-Ferris Industries of California, Inc.; BFI Newby Island Recycling; Leadpoint Business Services

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