Labor & Employment Law Daily NLRB declines to impose retroactive application of new joint employer test
News
Tuesday, August 4, 2020

NLRB declines to impose retroactive application of new joint employer test

By Ronald Miller, J.D.

Any presumption favoring retroactive application in this case was significantly outweighed by its potential ill effects.

On remand from the D.C. Circuit, the NLRB declined to retroactively apply the new joint-employer test announced in the Board’s 2015 Browning-Ferris decision to determine whether BFI was a joint employer. The Board agreed with BFI’s contention that retroactively applying the new joint-employer standard was inequitable. Retroactive application of the new standard would mean that the employer would be suddenly confronted with significant new duties and liabilities with regard to preexisting business relationships formed in reliance on the direct-and-immediate-control standard for determining joint-employer status. Such a result would be manifestly unjust, concluded the Board (Browning-Ferris Industries of California, Inc. dba BFI Newby Island Recyclery, July 29, 2020).

On August 16, 2013, an acting regional director issued a direction of election wherein he found that Browning-Ferris Industries (BFI) did not jointly employ the employees of Leadpoint. The union filed a timely request for review of the decision not to include BFI as a joint employer of the Leadpoint employees. On April 25, 2014, while the request for review was pending, the election was held and the ballots were impounded pending the Board’s ruling.

Joint employer test. On August 27, 2015, the Board reversed the acting regional director’s decision. In doing so, it overruled cases holding that an entity must exercise direct-and-immediate control over essential terms and conditions of employment of another employer’s employees in order to be a joint employer. In place of the direct-and-immediate control test, the Board adopted a new two-step test. Under this test, the Board would first determine “whether there is a common-law employment relationship with the employees in question.” Second, “[i]f this common-law employment relationship exists, the inquiry would turn on whether the putative joint employer possess sufficient control over employees’ essential terms and conditions of employment to permit meaningful bargaining.”

Nature of the employer control. For both parts of this test, the Board substantially redefined the nature of the employer control required to prove joint-employer status, holding that indirect or unexercised contractually reserved control could alone be dispositive. Applying its new joint-employer standard, the Board concluded that BFI and Leadpoint were joint employers of the petitioned for unit.

On September 14, 2015, after ballots revealed that a majority of voters had opted for union representation, the regional director issued a certification of representation adding BFI as a joint employer of the bargaining unit.

Thereafter, BFI refused to recognize and bargain with the union. On January 12, 2016, the Board granted the General Counsel’s motion for summary judgment, finding the refusal to bargain violated Section 8(a)(5) and (1). BFI refused to comply and filed a petition for review.

On December 28, 2018, the D.C. Circuit denied the Board’s cross-application for enforcement and remanded back to the Board. Reviewing the Board’s new joint employer standard, the court agreed with the Board that unexercised reserved control and indirect control can be relevant factors in determining whether an additional entity is a common-law joint employer. However, it found that the Board erred in analyzing whether BFI had indirect control over Leadpoint. The Board also failed to apply the second step of its standard.

Retroactive application of new standard. With regard to the possibility of the Board’s retroactive application of the new standard to BFI, the appeals court observed that retroactive application of the new joint employer test may be unwarranted or unjust where the old law was reasonably clear and on which employers may have relied in organizing their business relationships.

On remand, BFI contended that this case should be dismissed on the basis that retroactively applying the new joint-employer standard was inequitable. The Board found merit in this contention.

Presumption overcome. Although there is a presumption that new rules will be applied retroactively, the presumption “is overcome… where retroactivity will have ill effects that outweigh the mischief of producing a result which is contrary to a statutory design or to legal and equitable principles.” Consequently, in light of the appeals court’s concerns, the Board reconsidered the retroactivity issue and found that any presumption favoring retroactive application in this case was significantly outweighed by its potential ill effects.

The Board will apply a new rule “to the parties in the case in which it was announced and to parties in other cases pending at the time, so long as retroactivity does not work a manifest injustice. In determining whether retroactive application will work a manifest injustice, the Board typically considers the reliance of the parties on preexisting law, the effect of retroactivity on accomplishment of the purposes of the NLRA, and any particular injustice arising from retroactive application.

Reliance. In this case, the D.C. Circuit clearly emphasized the centrality of reliance interests to the retroactivity determination. The Board majority in the underlying representation case acknowledged and overruled three decades of Board precedent requiring direct and immediate control by one employer over another employer’s employees in order to establish a joint-employer relationship. Proof of indirect and/or unexercised control would not warrant finding a joint-employer relationship under pre-Browning-Ferris precedent. Thus, it was reasonable to assume that parties would rely on this law when organizing their business relationships.

Retroactive application of the new standard would mean that entities such as BFI would be suddenly confronted with the new reality that preexisting business relationships formed in reliance on the direct-and-immediate-control standard for determining joint-employer status would have thrust upon them unanticipated and unintended duties and responsibilities. Such a change represents a substitution of a “new law for old law that was reasonably clear.” As such, it would be manifestly unjust to fail to give BFI and similarly affected businesses reasonable warning before imposing such significant new duties and liabilities.

Election results. Also counseling against retroactive application of the Browning-Ferris standard in this case is the fact that the election was held, and the employees voted, on the basis that Leadpoint was the sole employer, not BFI and Leadpoint as joint employers. Thus, the Board determined that, although the reverse situation existed, the principles of H&W Motor Express militated against retroactivity with respect to the imposition on BFI when employees here cast their ballots on the assumption that a joint-employer relationship did not exist.

Accordingly, the Board concluded that the new joint-employer test announced in the underlying representation case should not have been applied retroactively in this litigation to determine whether BFI was a joint employer.

Interested in submitting an article?

Submit your information to us today!

Learn More

Labor & Employment Law Daily: Breaking legal news at your fingertips

Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on labor and employment legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.