New ABC Test Under Federal Labor Law? Dem-Sponsored Bill Would Make That Change

Independent contractor misclassification NLRB peacock

All eyes on me!

According to The Atlantic, when a peacock spreads and shakes its elaborate feathers, it shakes them at 26 times a second, which creates a pressure wave that is sensed by a female peahen through the crest atop her head. This precise frequency causes the female’s crest to vibrate in a way that is apparently very sexy for peafowl. The male seeks attention and, with just the right vibrations, he lets all the single pea-ladies know that he wants some action. Note to pea-fellas: If you like it, then you shoulda put a ring on it.

In a crowded field of Democratic Presidential hopefuls, something similar is happening, but it’s less pretty, less sexy, and less appealing for businesses across the country.

As Democratic legislators vie for union support in the upcoming 2020 election, they’re making sure to signal to workers and unions that they’ve got pretty feathers and they’re not afraid to use them. A new bill co-sponsored by Presidential hopefuls Kamala Harris (Calif.), Bernie Sanders (Vt.), Elizabeth Warren (Mass.), Cory Booker (N.J.), Kirsten Gillibrand (N.Y.), Amy Klobuchar (Minn.), and Rep. Tim Ryan (Ohio) would amend the National Labor Relations Act (NLRA) to redefine “employee” and “joint employment.”

The Protecting the Right to Organize Act of 2019 would impose a strict Dynamex-style ABC Test for determining Who Is My Employee? under the NLRA. A worker would be deemed an employee under the NLRA by default and could only be deemed an independent contractor if all three of the following could be proven:

(A) the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact, and
(B) the worker performs work that is outside the usual course of the hiring entity’s business, and
(C) the worker is customarily engaged in an independently established trade, occupation, or business.

This is the same strict ABC Test adopted by the California Supreme Court in Dynamex and by the Massachusetts legislature for its state wage and hour claims.

The Act would also redefine joint employment. It would require that an entity be deemed a joint employer under the NLRA if it “codetermines or shares control over the employee’s essential terms and conditions of employment.” So far, so good. But then there’s this: “In determining whether such control exists, the Board or a court of competent jurisdiction shall consider as relevant direct control and indirect control over such terms and conditions, reserved authority to control such terms and conditions, and control over such terms and conditions exercised by a person in fact.”

The Act would stymie the NLRB’s current effort at passing a new regulation that would limit “joint employment” to situations where actual control is exerted (not merely reserved) and where that control is exerted over essential terms and conditions of employment, such as hiring, firing, and pay.

Most damaging of all (but not related to independent contractor or joint employment issues), the bill would fundamentally change the collective bargaining process by imposing binding arbitration on the parties to resolve any disputes in contract negotiation. That change, if it were ever adopted, would change the nature of bargaining as we know it, potentially removing much of the incentive for unions to bargain in good faith.

If the Act emerges from committee, it will likely pass the House but has no chance of success in the Senate. Even if it passed, it would almost certainly be vetoed by Trump anyway.

For now, the Act is a political move intended by the Democratic Presidential hopefuls to demonstrate their pro-worker, pro-union credentials. For a certain audience, the Act looks pretty and may vibrate some crests. But for at least the next two years, this display of feathers is not likely to lead to any action.

Bonus feature: For another peacock-related post, click here.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Enter your email address to follow this blog and receive notifications of new posts by email.

2018_Web100Badge 

“This is a Cabinet”: DOL Proposes New Definition of Joint Employer, Seeks to Clear Up a Confusing Label

This post was originally published as a BakerHostetler Employment Alert on April 3, 2019. Cabinet joint employmentSometimes it’s obvious what something is, and you don’t need a label. Other times it’s not so obvious, and you do need a label. Then there’s the rare instance when it’s obvious what something is, but someone feels compelled to supply a label anyway. That third scenario is what I saw when I went to my daughter’s volleyball tournament last weekend and snapped this photo of a cabinet in the lobby. The label is small, but if you look closely, you’ll see that it helpfully declares the item to be a “cabinet.” It further announces, in red handwriting, that the item has been “sold,” thereby allaying my concerns that my daughter was spending her Saturday playing volleyball in a den of cabinet thieves.

The second scenario – label needed – is the focus of this Alert. And the territory is familiar ground ‒ joint employment.

It’s rarely obvious what that phrase means, and companies that use workers supplied by other companies have been seeking clarity for some time now. Ignoring Ronald Reagan’s famous quip about the nine most terrifying words in the English language, the Department of Labor (DOL) announced on Monday that it’s here to help.

Continue reading

Too Many Beef Livers? NLRB Addresses How It Will Review 29,000 Comments on Its Proposed Joint Employer Rule

NRLB Ring too many beef livers avocadosToo much of a good thing can be a bad thing. For example, according to this article in Popular Science, consuming 240 avocados in one sitting would put the average man at risk of sudden death by potassium poisoning. (It doesn’t say how many avocados an above-average man could eat, but presumably the number is similar.) 

A similarly bad outcome can result from over-consumption of beef livers, although it would take approximately 431 pounds of beef livers before the toxicity of excessive vitamin A might cause a man to think he should have stopped after 430.

Lots of comments can overwhelm an administrative agency’s internal organs as well. As we discussed here, the NLRB has proposed a new regulation that would make it harder to establish joint employment under the National Labor Relations Act. In response to the Notice of Proposed Rulemaking, the Board has received nearly 29,000 comments from interested organizations, unions, academics, business owners and individual workers (like Cindy, perhaps) about the proposed new rule.

Continue reading

We’ve Got Baby Steps Toward a New Definition of Joint Employment Under the FLSA.

Baby steps joint employment FLSA new rule

I still don’t know what this is, but I got it from Wikipedia.

According to Wikipedia, which knows everything, or thinks it does, Baby Steps is the name of a Japanese manga series by Hikaru Katsuki. I have no idea what that means, but apparently it’s a story of some sort, which I infer from the following description: “The story is centered on Eiichirō Maruo, a first year honor student who one day decides that he is lacking exercise.”

This does not make me want to watch it.

I will, however, be watching the baby steps being taken by the Department of Labor’s Wage and Hour Division (WHD). On February 28, the WHD submitted a proposed new rule on joint employment to the White House Office of Information and Regulatory Affairs (OIRA). The new rule would modify the meaning of “joint employment” under the Fair Labor Standards Act (FLSA), which is the federal law governing minimum wage and overtime requirements.

Continue reading

Joint Employment Update: Ohio Law Throws Franchisors a Bone, But It’s Not Entirely Delicious

This is Zippy enjoying a delicious treat.

When I throw my dog a bone, she is so happy. She goes and gets it, eats it, and wonders why she is unable to speak to express her gratitude. She doesn’t wonder, “Why is he throwing me a mere bone instead of an entire squirrel?” The bone is enough for complete contentment.

Ohio lawmakers have thrown franchisors a bone. They’ve limited the circumstances when franchisors can be held jointly liable if individual franchise owners commit certain Ohio employment law violations.

Under the new law, franchisors are not jointly liable for minimum wage, overtime, or pay frequency violations by franchise owners and are not jointly responsible for franchise owners’ responsibilities under unemployment insurance and workers’ compensation law — unless: Continue reading

Fecal Matter Meets Electrical Wind Machine: NLRB Scrambles to Re-Evaluate Joint Employment

NLRB rulemaking update browniong-ferris Hits the fanAccording to the British site, The Phrase Finder, the expression When the shit hits the fan “alludes to the unmissable effects of shit being thrown into an electric fan.” That’s lovely. The Cambridge Dictionary (also U.K.) describes the idiom a bit more delicately: “also, when the shit flies, [when] a situation suddenly causes a lot of trouble for someone.”

Thank you, British internet!

In any event, this expression seems to capture the predicament the NLRB suddenly finds itself in after the D.C. Court of Appeals issued its unexpected ruling a couple weeks ago in the ongoing Browning-Ferris case, which we wrote about here.

The ruling vastly complicated the NLRB’s efforts to adopt a more pro-business definition of “joint employment” that would require direct control over essential terms of employment before joint employment could be found. The D.C. Court of Appeals ruled that the meaning of “joint employment” under the National Labor Relations Act is determined by the common law Right to Control Test, and that the NLRB has no authority to change the definition in a way that is inconsistent with the common law meaning.

The common law Right to Control Test, to the current Board’s dismay, allows for a finding of joint employment when control is reserved, even if the right to control is not actually exercised. That ruling is contrary to the definition being proposed by the NLRB as part of its ongoing effort to enact a new regulation through the rulemaking process.

Since the D.C. Court of Appeals ruling, here’s what’s been happening:

First, two key Democratic lawmakers sent a letter to Board Chair John Ring, asking that the Board abandon its rulemaking effort in light of the court’s ruling. Nice effort, but that’s not likely to happen.

Second, “in light of the unique circumstance” posed by the court’s decision, the Board has again extended the period for the public to submit comments on the proposed rule. The new deadline is January 28, 2019, with reply comments due February 11, 2019. This is the third time the Board has extended the comment period. The second extension inspired one of my favorite posts, “Amazon Users (espec. Cindy, Amy & kris), Please Don’t Submit Comments On the NLRB’s Proposed Joint Employment Rule,” which if you missed, it’s not too late.

So what happens next?  The Board has a few options:

1. It can change the proposed rule to allow for a finding of joint employment when a company reserves the right to exercise control, even if the control is indirect and is never actually exercised, but only if the right to control covers “essential” terms and conditions of employment. That change would be consistent with the D.C. Court of Appeals ruling, but it’s not as sweeping a change as current pro-business Board majority would like.

2. It can plow forward with its current rulemaking plan and ignore the D.C. Court of Appeals. The NLRB typically ignores decisions by the U.S. Courts of Appeal on the basis that there are 12 regional federal Courts of Appeal and they don’t always agree, while on the other hand, the NLRB’s authority is national, not regional. This approach often results in circuit splits, in which Courts of Appeal issue contradictory rulings, a situation that generally results in the U.S. Supreme Court deciding the issue once and for all. If the NLRB takes this approach, a circuit split could develop, and the Supreme Court would be likely to get involved, but it would probably take years before that wound its way up to the Supreme Court.

3. It can ask the full slate of D.C. Court of Appeals judges to re-hear the case. This is called an en banc proceeding. Since the decision was 2-1, there could be some momentum toward the full slate of judges agreeing to reconsider the case, but even if that happens, there is no guarantee the ruling would be any different.

4. The D.C. Court of Appeals decision can be appealed to the Supreme Court. The Supreme Court could decide to hear the case, or it could decline and allow the law to further develop. The Supreme Court often waits to hear what other Courts of Appeal have to say before it issues a final decision. But even if the Supreme Court takes the case, there is no assurance that the NLRB will get the ruling it wants.

Here’s why. On one hand, the newly constituted Supreme Court is more conservative and is regarded as more pro-business, which would appear to suggest support for the outcome that the pro-business NLRB would want — authority to narrow the definition of joint employment to situations in which control is directly exercised, not merely reserved.

But on the other hand, the current Supreme Court seems less and less inclined to defer to agencies’ interpretations of statutes. While the current Supreme Court may be sympathetic to the outcome desired by the NLRB, it is unlikely to be sympathetic to the process by which the NLRB wants to achieve that outcome. The Supreme Court’s current members seem inclined to limit the authority of federal agencies to re-interpret the law.

There are lots of ways the joint employment saga might play out. But for now, it’s fair to say that the D.C. Court of Appeals decision was unexpected and messy, in a way that alludes to the unmissable effects of excrement being thrown into an electric fan (as the Brits might say).

For more information on joint employment, gig economy issues, and other labor and employment developments to watch in 2019, join me in Orlando on Jan. 24, Philadelphia on Feb. 26, or Chicago on Mar. 21 for the 2019 BakerHostetler Master Class on Labor Relations and Employment Law: Meeting Today’s Challenges. Advance registration is required. Please email me if you plan to attend, tlebowitz@bakerlaw.com. If you list my name in your RSVP, I will have your registration fee waived.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Enter your email address to follow this blog and receive notifications of new posts by email.

2018_Web100Badge

Backfired? New Ruling May Threaten NLRB’s Proposed Rule on Joint Employment

Joint employment bagpipe

The word “backfire” derives from the grooming practices of 15th century Scottish noblemen, who grew beautiful long fiery-red flowing back hair, which they brushed and braided into elaborate patterns, including the “Haggis Flow” and the “Scotch Tape.” Ok, not really. Efforts to rewrite history and change definitions can sometimes fall short of the mark.

The NLRB’s grand strategy for rewriting the definition of joint employment may have just backfired. A Court of Appeals decision issued late last week may jeopardize the Board’s rulemaking authority, even though that was not the issue before the Court.

Before we dive into the December 28, 2018 ruling, here is a quick refresher on how we got here:

  • In 2015, the Democratic-majority Board adopted a vastly expanded definition of joint employment, allowing a business to be deemed a joint employer (1) even if it did not control working conditions but merely retained the right to do so, or did so indirectly, such as through third party subcontracting, and (2) even if the working conditions that could be controlled were non-essential working conditions, not just the key terms and conditions like hiring, firing, and disciplining. This was the Browning-Ferris decision.
  • In early 2018, the newly constituted Republican Board tried to reverse its 2015 Browning-Ferris decision in a case called Hy-Brand, in which the Board enacted a much narrower, pro-business definition of joint employment, requiring direct and immediate control over essential terms and conditions of employment before a company could be deemed a joint employer.
  • Several weeks later, however, the Board reversed itself and rescinded the Hy-Brand decision after conflict of interest questions arose relating to one of the board members (Member Emanuel) who decided Hy-Brand. When the Board rescinded its Hy-Brand decision, the effect was to re-establish the expansive 2015 Browning-Ferris test as the operative definition of joint employer.
  • In light of its failed effort in Hy-Brand, the Board then chose to pursue a two-step Plan B for overruling Browning-Ferris and for narrowing the definition of joint employment.
  • Step 1 would be to enact a new regulation, creating a narrower definition of joint employment that would, in effect, overrule Browning-Ferris prospectively. That process is ongoing. Step 2 was to ask the D.C. Court of Appeals to reopen the otherwise mothballed appeal of the Board’s 2015 decision in Browning-Ferris, which adopted the current broad definition of joint employment.
  • In Step 2, the Board expected the Court of Appeals to find that the 2015 Browning-Ferris decision was an overreach and that the vastly expanded definition of joint employment could not survive. That ruling would have nicely positioned the Board to roll out its new regulation, which would substantially narrow the definition of joint employment, as it tried to do in the Hy-Brand case.

That brings us to this past Friday’s decision by the D.C. Circuit Court of Appeals (Dec. 28, 2018) and the real meaning of the word “backfire.” Step 2 did not go the way the NLRB had planned.

The Court of Appeals’ Ruling and Its Effect on Joint Employment

According to the 2-1 majority opinion, the question of whether there is a joint employment relationship under the National Labor Relations Act (NLRA) must be answered by applying the common law test for whether there exists an “agency” relationship.  The Board has no special expertise relevant to defining the common law of agency. Therefore, according to the Court of Appeals, the Board is awarded no deference in this area. In other words, the Board does not have the right to define or redefine joint employment in a way that would be inconsistent with the common law meaning of “agency.”

The Court of Appeals said that the Board’s 2015 ruling in Browning-Ferris — that indirect or reserved control can be considered when determining whether a joint employment relationship exists — was appropriate because it is consistent with the common law of agency.  Under the common law, it is the right to control that matters, even if that control is not exercised. In fact, the Court of Appeals concluded that Board has no authority to prohibit the consideration of indirect or reserved control when evaluating whether there is joint employment. (That’s what the Board is currently trying to do through rulemaking.)  The reason the Board cannot prohibit consideration of indirect or reserved control is that the common law definition of agency examines whether an entity has the right to control how work is performed, regardless of whether that control is exercised. This last point is important for reasons that the D.C. Court of Appeals was not directly addressing. That point — if it hold true — would cast doubt on the Board’s ability to implement its proposed new regulation. The regulation would require a showing of direct and immediate control (not merely indirect or reserved control) before joint employment can be found.

The D.C. Circuit Court of Appeals did not, however, give the Board’s 2015 Browning-Ferris ruling its full backing. Where the Browning-Ferris ruling went wrong, according to the Court of Appeals, was in allowing the consideration of indirect or reserved control over non-essential terms and conditions of employment.  The common law agency test requires control (or indirect or reserved control) over essential terms and conditions of employment (e.g., hiring, firing, disciplining).  The Court therefore ruled that the Board lacks authority to change that definition in a way that make a business a joint employer merely by entering into a standard subcontracting or staffing agency agreement. All such relationships involve some level of control over non-essential working terms, such as defining the type of work to be done by the subcontractor or staffing agency workers and dictating the desired result.

The 2015 Browning-Ferris case is now being remanded back to the Board to take another shot at it. That would be fine and dandy with the now-Republican-majority Board, except for the fact that the Board may now be impotent to make a meaningful pro-business change in this case, since Member Emanuel might be precluded from participating in the decision due to Littler’s representation of Leadpoint, the staffing agency in the Browning-Ferris dispute (or maybe he is not precluded now, since the one-year conflicts period has now lapsed). Member Emanuel was a shareholder in the Littler firm before his appointment to the Board in September 2017. Further complicating the possible recusal issue is the fact that Trump required his appointees to sign an Ethics Pledge that provided a two-year conflict of interest period, rather than the standard one-year period.

The most lasting effect of this Court of Appeals decision is likely to be that it calls into question whether the Board can, through rulemaking, redefine joint employment in a way that eliminates consideration of indirect or reserved control by a putative joint employer.  If the definition of joint employment under the NLRA is determined by the common law of agency, and the Board — according to this Court of Appeals — lacks the expertise to interpret the common law of agency, then the Board would lack authority to change the definition in the way it proposes.

On the other hand…

On the other hand, it may be that this decision has no lasting impact at all on the definition of joint employment under the NLRA. This was a 2-1 decision by U.S. Court of Appeals, not by the U.S. Supreme Court. The two judges in the majority were Obama appointees. The full D.C. Circuit could be asked to reconsider the issue in an en banc proceeding.  Or the matter could go to the Supreme Court (which seems unlikely).

Or, if past practice is any indicator of future behavior, the Board might just ignore the D.C. Circuit Court of Appeals, on the basis that there are 12 Circuit Courts and they often disagree. The Board is required to follow rulings by the U.S. Supreme Court, but it often ignores legal opinions issued by the individual Courts of Appeal. The Board must, of course, follow the D.C. Court of Appeals’ ruling as it relates to this particular dispute, but it will not necessarily take the Court of Appeals’ broader rulings as controlling authority on what the Board can or cannot do.

So where are we?

We’ll see. But two things are certain.  First, the definition of joint employment will continue to evolve; and second, the definition of backfire has nothing to do with Scottish nobleman or their back hair.

And at the end of the day, joint employment continues to be a messy, messy situation.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Enter your email address to follow this blog and receive notifications of new posts by email.

2018_Web100Badge