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.

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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.

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Amazon Users (espec. Cindy, Amy & kris), Please Don’t Submit Comments On the NLRB’s Proposed Joint Employment Rule

Joint employment rule NLRB comment period extended

Amazon has a popular feature that allows users to post questions about a product, and then anyone can then post an answer. But is that really such a good idea?

Should literally anyone be allowed to post a comment? Allow me to introduce you to Cindy C., who recently purchased an ice machine and is (I think) trying to be helpful to others who are considering purchasing the same brand of ice machine:

PNG image

 

Thank you Cindy. Not a helpful comment. If you decide to try the extension cord, first get out of the bathtub. Otherwise, the next post containing your name could be here.

Then there’s Amy N., who has neither Alexa nor an ounce of common sense:

6B1055D9-4CEB-45B0-A880-D540798F108A

Thank you Amy N. It’s really nice to hear from you and, best of all, now I know what to get you for Christmas!

Then there’s my favorite user comment, courtesy of kris:

8FB1A0FA-0C54-43AE-B088-8911A3FF77A6

Dear kris, we didn’t think that you did. And we still don’t. Not this thing or any other thing. You may resume finger painting.

Amazon is not the only democratic institution that invites all living, breathing creatures to provide public comments.

As we’ve written here, the NLRB is pursuing the administrative rulemaking process to craft a new definition of “joint employment.” As part of that process, there is a public comment period, during which anyone (even kris) can post a comment about the proposed rule.

So far, there have been about 8,000 comments posted, many cribbed from a cut-and-paste pro-union comment drive that invites adherents to write, “Dear _, I strongly oppose….” Many other comments, fortunately, include well-considered and thoughtful opinions, both for and against the rule. It’s the thoughtful comments that are the most helpful, kris.

The NLRB has extended the comment period through January 14, 2019, with an additional reply period through January 22 in which people can reply to a previously posted comment.

If Amy N. asks, comments may only be submitted via Alexa.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Happy Birthday, Rudolph! (You’re Still Just a Temp.)

Temporary workers rudolph reindeer employment law

At age 79, Rudolph is the youngest of Santa’s reindeer, having been created in a promotion for the Montgomery Ward department store in 1939. While he reliably shows up every December, Rudolph is still just a seasonal hire, presumably grazing with his caribou cousins somewhere in Lappland or Siberia the rest of the year.

Seasonal hires, or temps, present special problems. There are different kind of temps.

Temps retained as W-2 employees are regular employees, even if only retained for a short period of time.  Regular employment rules apply.

Temps retained through staffing agencies are a little different, but not much. They are likely joint employees of both the worksite employer and the staffing firm.  They likely take direction and supervision from the worksite employer and work side-by-side with the worksite employer’s regular employees.  These characteristics are generally signs of joint employment.

What is the impact of joint employment? Potentially none, but if the staffing agency does not properly pay its employees, the worksite employer may be on the hook. It is critical to ensure that hours are properly recorded and the staffing firm is reputable and reliable in its pay practices.

The use of temps can be a tremendous help during the holiday season, like having a luminous red headlight for a nose when delivering toys via sleigh.  Just be sure to tighten all the reins before taking off.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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What is Joint Employment?

What is joint employment

Despite the spread of marijuana legalization initiatives, the term “joint employment” has nothing to do with edibles, 4/20 day, or the prevailing aroma at a Jimmy Buffett concert. Joint employment simply means that more than one entity is a worker’s employer — at least under some applicable law.

In joint employment there is usually a primary employer and a secondary employer. The primary employer, for example, could be a staffing agency. The staffing agency pays the worker, onboards the worker with tax and immigration forms, and assigns the worker to a worksite. The secondary employer is the company where the staffing agency worker performs the services. It’s the company that most directly benefits from the work being performed.

Even though the secondary employer expects the primary employer (the staffing agency) to pay a minimum wage, to properly calculate and pay overtime, and to provide other benefits to its primary employees, a secondary employer can be held liable if the primary employer drops the ball. If the ball dropping is a violation of the law — for example, the primary employer didn’t properly pay overtime — then both joint employers can be held liable.

Joint employment is a backup plan for what happens when the primary employer doesn’t do what it’s supposed to do. If Staffing Agency A goes bankrupt and doesn’t pay wages, or if it miscalculates overtime, or if it doesn’t pay for off-the-clock work, both Staffing Agency A and Company B can be deemed joint employers. As joint employers, either company can be held fully liable when a worker doesn’t get what the law says he or she should get.

Let’s digest that for a moment: That means a joint employer can be held responsible for wage and hour violations even when it has no control over how the primary employer runs payroll or calculates worker pay.

In other words, being a joint employer can mean getting punished for things you didn’t do — and weren’t expected to do. As we explained here, it’s like taking steroids by accident.

That hardly seems fair. But it’s the law, intended to protect workers and to ensure there are deep pockets somewhere to ensure the worker is properly compensated for work performed.

So do you want to avoid joint employment? Not necessarily.  Joint employment by itself is not against the law. It is not illegal to be a joint employer.  Joint employment becomes a problem only when the primary employer didn’t treat its employees as the law requires. The law doesn’t care who was supposed to do it. In a joint employment situation, both companies are responsible.

That’s why a detailed contract is so important when engaging a staffing firm to supply employee labor. Contracts with staffing agencies should clearly spell out which company is responsible for what. You can read more here about common deficiencies in off-the-shelf staffing agency contracts. Those agreements generally need to be beefed up to provide proper protection.

How do you know if you are a joint employer? That’s (unfortunately) a tougher question to answer. The test for Who Is a Joint Employer? varies state-by-state, law-by-law. Here is a map showing the current chaos and inconsistencies in the tests. Several previous blog posts address the various tests being used and how these tests continue to develop. We’ll continue to post frequently on developments in joint employment, which is one of the focal points of this blog.

For now, my best non-legal advice is: Subscribe to this blog!

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© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Notification by Telex? Time to update your forms!

937EFF23-96B2-458B-B0DC-AA833A825379

Thank you Wikipedia, You know everything, making me feel so inadequate.

I recently edited a form agreement that allowed for notification “by facsimile or telex.” I deleted “telex” because, well, does telex even exist anymore? I then sent my edits back to the lawyer on the other side.

The other lawyer put it back in!

I then suggested he provide his client’s telex exchange and I asked if we could borrow his 50 baud modem and telex equipment to facilitate communications, because, um, our local antique store was fresh out of telex equipment. (I considered pushing back and insisting that all communications be in morse code but resisted. I admit to feeling pangs of regret that I didn’t push harder for the dashes and dots.)

People, update your forms!

If your independent contractor agreements and staffing agency agreements have not been reviewed since the widespread adoption of horseless carriages, it’s time for a fresh look. The risks of joint employment and independent contractor misclassification are real, and old forms almost definitely do not contain the types of clauses your business needs to protect itself.

For contracts with suppliers of labor, is your vendor accepting sole responsibility to do all of the things that employers must do, including hiring, firing, supervising, withholding taxes, tracking hours, and about a dozen other important tasks? Under many laws, you’re jointly liable if they fail, so you need robust contractual representations to shift liability.

Does your contract include sufficient insurance requirements and specific enough indemnity provisions to protect against a joint employment or misclassification claim?

Does your independent contractor agreement have specific descriptions of the types of control your business can and cannot exert? If you are not disclaiming the right to control a list of items, you’re missing a prime opportunity to turn the contract into strong evidence in your favor, in the event of a misclassification challenge.

For those of you, like me, who wouldn’t have the first clue how to telex someone, here’s what I learned on Wikipedia:

The telex network was a public switched network of teleprinters similar to a telephone network, for the purposes of sending text-based messages. Telex was a major method of sending written messages electronically between businesses in the post World War II period. Its usage went into decline as the fax machine grew in popularity in the 1980s.

The “telex” term refers to the network, not the teleprinters; point-to-point teleprinter systems had been in use long before telex exchanges were built in the 1930s. Teleprinters evolved from telegraph systems, and, like the telegraph, they used binary signals, which means that symbols were represented by the presence or absence of a pre-defined level of electric current. This is significantly different from the analog telephone system, which used varying voltages to encode frequency information. For this reason, telex exchanges were entirely separate from the telephone system, with their own signalling standards, exchanges and system of “telex numbers” (the counterpart of telephone numbers).

Telex provided the first common medium for international record communications using standard signalling techniques and operating criteria as specified by the International Telecommunication Union. Customers on any telex exchange could deliver messages to any other, around the world. To lower line usage, telex messages were normally first encoded onto paper tape and then read into the line as quickly as possible. The system normally delivered information at 50 baud or approximately 66 words per minute, encoded using the International Telegraph Alphabet No. 2. In the last days of the telex networks, end-user equipment was often replaced by modems and phone lines, reducing the telex network to what was effectively a directory service running on the phone network.

Keep your telex handy, my friends. You never know when you might need one — by contract.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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What does the NLRB’s Proposed New ‘Joint Employment’ Rule Mean for Businesses?

360 degrees joint employment NLRB new rule

True story. Late 1980s. Early days of fantasy baseball. One of my high school buddies — we’ll call him The Beast — finishes last but decides he’s ready to turn things around. The Beast stands up at the next year’s draft and announces his new team name, intending to show us that he’s about to reverse last year’s standings: 360 degrees.

No one had the guts to say it. Only later did someone tell him he probably meant 180 degrees. He finishes last again. The Beast no longer plays fantasy baseball but lives a comfortable life as a tax lawyer in Florida.

A complete turnaround may now be in the works when it comes to defining “joint employment.” Recent actions by the National Labor Relations Board signal an upcoming 180-degree shift.

Click here to read the rest of the story, recently published in Westlaw’s Journal Employment and Practitioner Insights.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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