D.C. Circuit Rules in Joint Employer Case

Sean P. Redmond
Vice President, Labor Policy, U.S. Chamber of Commerce

Published

January 03, 2019

The D.C. Circuit on December 28 issued its opinion in Browning-Ferris Industries of California, Inc. v. NLRB, a long-running case involving the Obama National Labor Relations Board’s (NLRB) efforts to broaden the scope of the “joint employer” doctrine under the National Labor Relations Act (NLRA). The opinion was a divided 2-1 decision that was a mixture of good and bad outcomes for the business community.

The joint employer issue stems back to a 2015 ruling by the NLRB, in which it adopted an expansive interpretation of which companies may be considered a “joint employer.” Under this new interpretation, two separate employers could be considered “joint” for NLRA purposes if one merely had “indirect” or “potential” control over the terms and conditions of another employer’s employees. This new standard reversed decades of precedence based on an employer’s needing “direct” and “immediate” control before being considered a joint employer. As a “joint employer” under this expansive standard, a business could face liability for workplaces it does not control and workers it does not actually employ.

The NLRB’s decision was of considerable importance to franchise businesses, government contractors, and any companies with significant supply chain relationships—which these days, of course, is just about everyone. Most prominently, the NLRB sought to use this decision to expand the number of companies that could be subject to unionization—with a case against McDonald’s being particularly noteworthy.

After the NLRB issued its 2015 ruling, the Browning-Ferris case made its way into federal court, leading to last Friday’s decision. In the opinion, the majority upheld the NLRB’s general approach to which companies may be considered a joint employer, i.e. that “indirect” or “potential” control may suffice, which was not the ideal outcome.

However, the majority opinion also had two favorable aspects. First, it ruled that the NLRB is not entitled to any deference (including Chevron deference) in construing the joint employer doctrine. This facet of the decision serves the important goal of limiting the deference that the NLRB receives for interpreting a common law doctrine, such as the joint employer doctrine, as the NLRB has no authority or expertise when it comes to the common law.

In addition, the majority concluded that the NLRB misapplied the joint employer doctrine in this specific case and thus vacated the Board’s conclusion that Browning-Ferris was a joint employer. Moreover, in detailing the ways in which the NLRB erred in its analysis, the opinion found that the NLRB’s application of the joint employer standard deviated from the common law of agency.

While the court’s ruling is not yet final, as either side could ask for a rehearing by the full court, if it takes effect the case will be back before the NLRB for consideration pursuant to the decision. Time will tell what the current NLRB majority will do with it then. Meanwhile, the Board is pressing forward with its rulemaking to define its joint employer standard, which one hopes will settle one of the many troublesome policies that the Obama-era NLRB left behind.