NLRB Shifts to Republican Majority; Change in Joint Employment Doctrine Is Likely

NLRB joint employment william emanuelWatching the National Labor Relations Board is like riding a see-saw (a very slow one, and not a very fun one, but stay with me here).

Board members serve five-year terms and, when they expire, the President has the right to appoint a successor, with confirmation by the Senate. Predictably, under Democratic administrations, the Board tips toward union workers’ rights, and under Republican administrations, the Board tips toward protecting businesses.

With the late September confirmation of William Emanuel to the Board’s fifth (and tie-breaking) seat, the see-saw tipped back toward the side of protecting businesses.

Emanuel joins the Board from a defense firm that represents many large companies in labor disputes. Firms that represent companies in labor disputes typically do not also represent employees because doing so would create philosophical conflicts between the firm’s clients. You’d be arguing to interpret the law one way for an employee client, then another way for an employer client. Emanuel’s background therefore, has been pro-business.

As I wrote here, that background caused several Democrats to express concern. It was little surprise, then, that he was confirmed by a partisan vote of 49-47, winning by a safety when the Democratic quarterback was sacked in the end zone late in the fourth quarter.

Emanuel joins Republicans Philip Miscimarra and Marvin Kaplan, giving Republicans a 3-2 majority on the Board for the first time in almost 10 years.

The Board does not decide which cases to bring. The NLRB General Counsel does that. But the Board acts as the main decision-making body for labor law disputes, with its decisions appealable to the U.S. Courts of Appeal.

One of the Board’s most controversial decisions in the past five years was the Browning-Ferris decision in 2015, which drastically lowered the bar for finding joint employment in a relationship. You know those playground monkey bars you used to have to jump to reach? The Board lowered those to knee level. You’d have to limbo to get under them. They are no fun to play on. Under the new standard, a business can be a joint employer even if it exerts only indirect and minimal control. You can read more about that decision here.

The Browning-Ferris case is currently under appeal in the D.C. Circuit Court of Appeals. It might be affirmed, might be reversed. But here’s what you should remember: The NLRB tends not to follow the rulings of the U.S. Courts of Appeals. The NLRB’s decisions cover all 50 states, but each Court of Appeals covers only a handful of states, and so its rulings do not have widespread reach.

So no matter what the Court of Appeals does in Browning-Ferris, the NLRB is likely to continue to apply the standard it wants to apply. Under the Obama Board, that standard was to lower the monkey bars to your knees. Under the new Board, the standard for finding joint employment is expected to be raised back up to the point where you can swing freely from bar to bar without your feet ever touching the mulch below. The new Board is likely to re-establish the old joint employment standard, in which more direct control over workers is required for a finding of joint employment under federal labor law.

This change won’t happen right away. It may be a while before the right case gets to the new Board and the new Board has the opportunity to change course. But it is expected to happen.

Employers concerned about being tagged as joint employers for labor law purposes should remain cautious and continue to follow developments. Even if the labor law standard changes, though, there are still different tests for joint employment under different laws, so a change will have limited effect. For now, the indirect Browning-Ferris standard remains in place, but probably not for too much longer.

© 2017 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.

Can Independent Contractor Misclassification Automatically Violate Federal Labor Law? (Hint: Yes)

The past two weekends, we have seen NFL players link arms in solidarity. They protest mistreatment and injustice in society, not mistreatment and injustice by their employers. In fact, there have been several instances where owners and coaches have joined in.

Had the players been protesting actions by their employers — their teams — their actions likely would be considered “protected concerted activity” under the National Labor Relations Act (NLRA). The NLRA grants employees the right to act collectively to protest terms or conditions of their employment. Employees have these rights even if there is no union.

NLRA rights apply only to employees, not to independent contractors. Independent contractors have no right under the NLRA to engage in collective behavior. In fact, antitrust laws can sometimes prohibit independent contractors from acting collectively — such as in price fixing.

So let’s get to the issue that is the focus of this blog — the issue of Independent Contractor vs. Employee.

Here’s the question of the day:

If independent contractors have no rights under the NLRA but employees do, can the mere act of misclassifying independent contractors be considered a denial of NLRA rights? 

Yes, said an Administrative Law Judge in a recent case involving couriers.

Here’s the judge’s reasoning: Employees have NLRA rights, allowing them to act collectively. An employer violates the NLRA by denying an employee the right to act collectively. Protected concerted activity can include discussing wages with co-workers, discussing discipline, speaking out against a supervisor, criticizing work conditions, and a broad range of other activities (many of which you probably never thought were protected).

Independent contractors do not have these rights because the NLRA applies only to employees. By misclassifying a worker as a contractor, the judge ruled, a business is essentially telling the worker — who is actually an employee — that he has none of these rights.

Telling an employee that he has no right to engage in protected concerted activity is pretty clearly a violation of the NLRA.

And there you go.

So what does that mean for businesses that use independent contractors? In other posts, we have discussed many of the negative consequences of independent contractor misclassification. A business that has misclassified workers as independent contractors (when they should really be deemed employees) can be liable for failure to pay employment taxes, failure to provide workers’ compensation and unemployment coverage, failure to follow hiring and paycheck laws, failure to provide employee benefits, and more.

Now add to that list a possible automatic violation of the National Labor Relations Act — at least according to this judge.

You can’t see me, but I am kneeling in protest.

© 2017 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.

 

Update: Uber’s Misclassification Cases, Arbitration, and the Supreme Court

Independent contractor vs employee Uber misclassification lawsuit arbitration agreements IMG_1111Remember the children’s game called Red Light, Green Light? One ambitious youngster is selected as the traffic cop, who randomly shouts “red light” or “green light,” requiring all the children to run and stop and start in short bursts that would cause an adult human to tear an ACL.

That’s essentially what’s happening in the big Uber misclassification case that has been pending in California since 2014. The case is called O’Connor v. Uber Technologies and is being overseen by traffic cop / federal judge Edward Chen in San Francisco. If anyone ever gets to the finish line, it will eventually be determined whether Uber drivers are properly classified as independent contractors, rather than employees.

There are lots of Uber cases, but this one is the biggie for now, with potentially a billion dollars at issue. For those keeping score at home, that’s 1,000 times more than Dr. Evil demanded for the return of the Kreplachistan warhead.

In December 2015, the judge approved a class of 240,000 drivers, and allowed the case to proceed toward a trial. Green light! Notably, many of the drivers in the class had signed arbitration agreements preventing them from participating in a class action. The judge, however, ruled that the arbitration agreements were unenforceable. He said that the agreement prevented the drivers from engaging in “protected concerted activity” (participating in a class action lawsuit), a right protected under the National Labor Relations Act (NLRA).

Now wait a minute. We have a chicken and egg problem here. The NLRA only applies to employees. If the drivers are truly independent contractors, the NLRA does not apply, and the validity of the arbitration agreements should not be an issue. Uber filed an immediate appeal, claiming that the agreements are valid and that judge should not have allowed the case to proceed as a class action. (Red light?)

In April 2016, the Ninth Circuit Court of Appeals agreed to hear Uber’s appeal.

Meanwhile, Judge Chen allowed the case to proceed toward trial, despite the appeal. Green light! But both sides flinched (Red light!), and the case settled for $100 million.

But wait. A judge must approve a class settlement. This judge ruled the settlement was unfair to drivers since the actual recovery in trial could be much greater. (Hey, isn’t that the point of a settlement? The drivers also might have taken home nothing!) Anyway, Green light!

Meanwhile, back at the Ninth Circuit, the appeals court issued an order last week that said, “Hey, everybody wait.” Red light!

The Court of Appeals noted that the U.S. Supreme Court is about to decide whether employee arbitration agreements that waive the right to participate in a class action are permissible, or whether they violate the NLRA. That’s the same issue that led Judge Chen to call “Green light!” in 2015 and certify the class of Uber drivers. The Supreme Court’s decision will likely govern whether the Uber drivers’ arbitration agreements are valid.

On October 2, the Supreme Court will hear oral arguments on this issue, and a decision is expected in the first half of 2018. The Supreme Court’s decision will have far reaching consequences for all businesses who ask their workers to sign arbitration agreements waiving the right to trial and waiving the right to participate in a class action.  So far, courts around the country have split on this important issue, reaching different conclusions about whether these agreements are allowed. The Supreme Court decision will settle this issue for everybody.

The Supreme Court case, called NLRB v. Murphy Oil USA, will be one of the more significant employment law decisions from the Supreme Court in a long time. You can read more here from SCOTUSblog or here from Baker Hostetler blogs.

© 2017 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.

Subcontractors Can Be Jointly Liable for Contractors’ Labor Law Violations

Otter: “He can’t do that to our pledges.”

Boon: “Only we can do that to our pledges.”

–Animal House, 1978

Subcontractors are like pledges in a way. They have to abide by the rules that apply to the primary contractor. If they fail to do so, they are responsible. Fairness isn’t really the issue.

A recent case shows how subcontractors can be held responsible when a primary contractor improperly fails to bargain with a union. In 2014, a contractor won a bid to take over a Job Corps Youth Training Center. The Center had been a union facility, and the contract was set to expire right around the same time the contractor took over operations. The contractor brought in a subcontractor, MJLM, to handle wellness, recreation,

The contractor initiated a new hire process, and some union employees were rehired while others were not. The contractor imposed new terms and conditions of employment, disregarding the progressive discipline and other procedures that had been negotiated into the prior union contract.

The union filed an unfair labor practice charge with the NLRB, alleging that the contractor engaged in various unfair labor practices, including making unilateral changes to terms of employment without bargaining and improperly discharging various union employees. The Board’s General Counsel amended the complaint to allege that MJLM was equally responsible for any violations as a joint employer.

MJLM fought back, claiming that it was along for the ride, but the NLRB — and ultimately the Fifth Circuit Court of Appeals — found otherwise. The Board and the Court found that MJLM was a joint employer because it was involved in the hiring process, had influence over wages, assisted in setting holiday schedules, and helped to operate the center.

MJLM, as a subcontractor, was found to be a joint employer and therefore equally responsible for any unfair labor practices committed by the contractor.

When I read the case, I assumed the case was decided under the controversial new Browning-Ferris standard that allows for a finding of joint employment if there was merely indirect control. I was wrong. The Board (and Court) ruled that even under the old standard requiring direct exercise of control, the subcontractor was a joint employer.

Businesses should remember that joint employment can result in liability for violations by others. A subcontractor can be held responsible for unfair labor practices by a contractor. In this case, both the contractor and subcontractor were required to recognize the union, undo their unilaterally imposed practices, commence bargaining, and reinstate and make whole the employees who were not rehired.

MJLM was just as responsible as the contractor. To paraphrase the Court’s decision, with apologies to Dean Wormer, “The time has come for someone to put his foot down, and that foot is me.”


© 2017 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.

Can Independent Contractors Form Unions? Seattle Wants to Allow It.

space-needle-independent contrcator drivers seattle uber lyft seattle law ordinanceA legal battle in Seattle (“The Battle of Seattle!”) may soon determine whether independent contractor drivers can form unions. In 2015, the city passed a law allowing Uber and Lyft drivers to organize. The mayor allowed the law to go into effect but didn’t sign it because he was concerned it would spawn expensive litigation. He was right.

This month, a federal judge handed the City a victory, dismissing a lawsuit by the U.S. Chamber of Commerce which had argued that the ordinance was illegal. The decision is certainly not the last word on the subject, since the Chamber will appeal and there is a companion lawsuit still pending anyway.

The issues go beyond the basic question of whether independent contractors can form unions.

Generally, they cannot. Independent contractors are separate businesses. Antitrust law generally forbids businesses from banding together and collectively fixing prices and other conditions. You know the drill: Collusion bad, free market good.

The judge ruled that the circumstances here, however, are different than usual. First, it’s worth noting that the “unions” aren’t really unions (despite being overseen by the Teamsters), since unions are for employees and these are representation associations. That seems like word play to me, but everyone’s being careful not to call these things “unions.”

Second, the situation here is not merely that independent contractors are banding together to fix prices. Rather, a local law has established a procedure for ride hailing drivers to collectively share information in a particular format and setting, then negotiate collectively in a government-approved manner. The law enables the activity, not the drivers.

Ok, but what about the National Labor Relations Act (NLRA)? Only employees can unionize, right? Well, sort of. The NLRA definitely does not apply to independent contractors.  But, then again, the NLRA definitely does not apply to independent contractors.

So what does that mean? Does the NLRA preempt laws that would allow non-employees to unionize (as the U.S. Chamber of Commerce argued)? Or does the NLRA’s inapplicability to contractors mean that Congress was indifferent (and silent) as to whether independent contractors could organize? The judge went with Door #2, deciding that the NLRA did not pre-empt the City of Seattle from enacting this ordinance.

The judge dismissed the lawsuit, finding that the Seattle ordinance did not violate any federal or state laws.

This is a case to watch. If Seattle ultimately succeeds in setting up a way for independent contractors to band together and collectively bargain, the gig economy could be changed fundamentally. Other cities would be sure to follow suit and pass similar laws.

A lot still needs to be sorted out, and this is a case that could eventually be heard by the U.S. Supreme Court. An ordinance like this poses a challenge to the scope of federal authority over labor law and antitrust law, both of which are areas where a uniform national policy has generally been considered important to maintain.

Keep an eye on this one. We’ll see if Seattle can hold onto the ball this time, or if the city again throws an errant pass to a wide-eyed Malcolm Butler hiding in the end zone. [Seahawks fans are advised not to click on this link.]

///Update 9/11/17: In early September, the Ninth Circuit Court of Appeals placed this ordinance on hold, while the case is on appeal. That means the ordinance is not currently in effect, and  independent drivers cannot currently organize under this law. A final decision is expected sometime in 2018.

© 2017 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.

Appeals Court Slams NLRB Joint Employer Finding in Landmark CNN Case, But Ruling May Prove Hollow

NLRB CNN joint employment Browning-Ferris overrule Second Circuit Court of Appeals IMG_1094A federal Court of Appeals has ruled that the NLRB cannot abruptly change its definition of joint employment without sufficient explanation. This decision (the CNN case) rebukes the NLRB for its initial attempt, in 2014, to expand the definition of joint employment.

This decision does not, however, address the Browning-Ferris case that followed in 2015, in which the Board similarly expanded the definition of joint employment but, that time, with an expansive explanation and justification for doing so. Browning-Ferris in on appeal too.

Here’s what happened.

Back in the good old days, when TV was pure and the world had not yet been exposed to Janet Jackson’s halftime nipple, CNN used to contract with an outside company who supplied technicians for its TV production. CNN’s camera operators, sound technicians, and broadcast engineers were employees of a third party, and they were represented by a union.

In late 2003, just a few months before that fateful Super Bowl wardrobe malfunction, CNN decided to bring that work in house. It set up a hiring and interview process and then directly hired its own technicians, severing its ties with the third party.

That made the union mad.

The union claimed the decision was motivated by anti-union animus and filed an unfair labor practice charge. The NLRB ultimately agreed with the union, determined that CNN was a joint employer of the third party technicians, and therefore had to respect the union status of the technicians. CNN could not hit the reset button without bargaining.

There was more to the decision too, with findings of anti-union statements by supervisors and a question about whether CNN was a successor employer (which is not the same thing as being a joint employer), but for our purposes, let’s focus on the joint employment piece.

Before the Board’s CNN decision, the legal standard for joint employment under the NLRB (remember, different laws have different standards) required “direct and immediate control.” In the CNN decision, the Board inexplicably abandoned that standard and ruled that two separate entities are joint employers of a single workforce if they “share or codetermine those matters governing the essential terms and conditions of employment.”

“Share or codetermine” is much looser than “direct and immediate control.” Think of your teenage children. You may try to “share and codetermine” whether they have a party at your house when you are out of town on business, but you have no “direct and immediate control” over the matter. At least not while it happens. (Purely hypothetical. My kids didn’t do this. Kids, if you are reading, DON’T do this!)

This case has been crawling through the courts for years, but finally last week, the Second Circuit Court of Appeals ruled that the NLRB could not simply switch the test without explaining itself. On that basis alone, the Court rejected the conclusion that CNN was a joint employer of the third party technicians.

So what does this mean for Browning-Ferris and the vastly expanded definition of joint employment that the Board instituted in that case?  Unfortunately, nothing.

In contrast to the CNN case, the Board’s Browning-Ferris decision included a lengthy and expansive discussion of the joint employer standard and why the Board — like in Sympathy for the Devil, “saw it was a time for a change.”

The Browning-Ferris case is also on appeal in the Second Circuit Court of Appeals (the same appellate court that just issued this decision) but will be heard by a different panel of three judges. A decision in that case is expected in the next several months.

For now, the Browning-Ferris standard — that indirect control is enough to demonstrate joint employment — remains the standard used by the NLRB.

© 2017 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.

Joint Employment Legislation Needs to Be Expansive — If It’s to Be Effective

IMG_1093On Monday, we wrote about the Save Local Business Act — proposed legislation that, if passed, would create a new definition for joint employment under the NLRA and FLSA. But would that law go far enough?

No. Not at all.

On the bright side for businesses, the law would provide some predictability in that staffing agency workers would most likely be excluded from bargaining units. It would also remedy the current unfairness that results when a staffing agency makes payroll and overtime miscalculations but the company using the workers is held responsible as a joint employer.

But much more needs to be done to provide real clarity and predictability for business owners.

First, the law fails to address who is a joint employer under other federal employment laws, including the Family and Medical Leave Act, Title VII, the Americans with Disabilities Act, the Age Discrimination in Employment Act, and the Occupational Health and Safety Act. Vast uncertainty in these areas would remain.

Second, the law does nothing to address the patchwork of standards under state and local laws. Businesses are subject to those laws too, and it’s fairly common that state and local standards for determining joint employment differ from state-to-state and law-to-law.

Businesses that operate in multiple locations would still be subject to different standards under different laws in different locations. The HR Policy Association has recommended that any legislation intended to clear up the messy patchwork of joint employment standards should include federal preemption or a safe harbor provision — something to ensure that businesses can rely on one set of rules to know whether they are a joint employer or not. That would make much more sense.

The newly proposed legislation has a long way to go. It might never even get to a vote. Let’s hope, however, that the introduction of this bill is just a first step, and that through the amendment process or through a Senate bill, its shortfalls will be addressed.

Business deserve the certainty that would come from a more comprehensive piece of legislation.

© 2017 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.