D.C. Circuit Affirms Joint Employer Standard in End-of-Year Decision
Legal Sidebari
D.C. Circuit Affirms Joint Employer Standard
in End-of-Year Decision
January 7, 2019
In one of its final opinions for 2018, the U.S. Court of Appeals for the District of Columbia Circuit
affirmed the joint employer standard established for collective bargaining purposes by the National Labor
Relations Board (NLRB or Board) in an August 2015 decision that received significant attention from the
business community, as well as Congress. Critics of the standard, which allows for consideration of a
putative joint employer’s indirect or reserved control over a group of workers, have argued that it creates
uncertainty about when two entities will be considered joint employers for purposes of the National Labor
Relations Act (NLRA). In Browning-Ferris Industries of California v. NLRB, however, the D.C. Circuit
maintained that the standard’s consideration of an entity’s indirect or reserved control has extensive
support in the common law of agency. Nevertheless, the court returned the case to the Board, finding that
the agency “did not confine its consideration of indirect control consistently with common-law
limitations[.]” The D.C. Circuit asked the Board to “explain and apply its test in a manner that hews to
the common law of agency.”
The D.C. Circuit’s decision was issued less than three weeks before the end of the comment period for a
new joint employer rule. Following a change in the NLRB’s composition, the agency proposed the new
rule in September 2018. Under the proposed rule, an entity would be considered a joint employer of a
separate entity’s employees only if it possesses and actually exercises “substantial and immediate control
over the employees’ essential terms and conditions of employment in a manner that is not limited and
routine.” The Board maintains that the new rule will provide greater clarity to joint employer
determinations by requiring evidence of direct and immediate control. In Browning-Ferris, the D.C.
Circuit observed: “The Board’s rulemaking . . . must color within the common-law lines identified by the
judiciary.” By excluding consideration of indirect or reserved control, however, the proposed rule could
arguably face a future court challenge.
Background
The dispute in Browning-Ferris first arose in 2013 after a union petitioned to represent a group of workers
placed in one of the company’s recycling facilities by a staffing company, Leadpoint Business Services,
pursuant to a labor services agreement. Under the agreement, Leadpoint was responsible for hiring the
workers, determining their wages, and evaluating their performance. Browning-Ferris, however,
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established the facility’s schedule of working hours, could reject or “discontinue the use” of a Leadpoint
worker at the facility for any reason, and retained other rights pursuant to the agreement.
Applying a joint employer standard that had been in place since 1984, an NLRB regional director
determined that Browning-Ferris and Leadpoint were not joint employers of the relevant employees.
Under that standard, the Board had considered not only whether the putative joint employer shared the
ability to control or codetermine essential terms and conditions of employment, but also whether it
exercised direct and immediate control over these employment matters. The regional director concluded
that Browning-Ferris did not control the daily work performed by the Leadpoint workers, and that the
company’s control over the workers’ terms and conditions of employment was neither direct nor
immediate.
On appeal, a majority of the Board’s five members in 2015 not only reversed the regional director’s
decision, but adjusted the old joint employer standard. The majority described both the policies of the
NLRA and the diversity of current workplace arrangements before “restating” a reconsidered joint
employer standard. Acknowledging the increased use of staffing arrangements and contingent workers,
the majority observed: “This development is reason enough to revisit the Board’s current joint-employer
standard . . . If the current joint-employer standard is narrower than statutorily necessary, and if joint-
employer arrangements are increasing, the risk is increased that the Board is failing in what the Supreme
Court has described as the Board’s ‘responsibility to adapt the Act to the changing patterns of industrial
life.’”
The majority concluded that two or more entities would be considered to be joint employers of a single
workforce if they are employers under common law, and if they share or codetermine those matters
governing the essential terms and conditions of employment. The majority indicated that the Board
would no longer require that employers exercise direct control over such employment matters. Instead,
joint employer status could be established even if an employer’s control over employment matters is
indirect or reserved by contract.
The majority explained that consideration of an entity’s indirect or reserved control over workers when
making a joint employer determination is consistent with common law principles. These principles
recognize an individual as being employed by an entity if he is subject to its control or right to control.
The majority maintained that the Board’s old standard disregarded consideration of an entity’s right to
control workers, particularly when that right is not exercised: “Just as the common law does not require
that control must be exercised in order to establish an employment relationship, neither does it require
that control (when it is exercised) must be exercised directly and immediately . . .”
By eliminating the requirement of direct and immediate control over workers’ terms and conditions of
employment, the majority indicated that it was returning to the Board’s traditional joint employer
standard. The majority explained that the emphasis on direct and immediate control evolved from earlier
Board decisions that better reflected the common law and a recognition of indirect and reserved control as
a factor in establishing joint employment. Applying the “restated” joint-employer standard to the case at
hand, the majority concluded that Browning-Ferris and Leadpoint were joint employers of the relevant
workers. The majority found examples of direct, indirect, and reserved control over the Leadpoint
workers, including: Browning-Ferris’s unilateral control over certain facility functions that had a direct
connection to work performance; Browning-Ferris’s requirement that all applicants pass drug tests; and
Browning-Ferris’s retained right to reject any worker referred by Leadpoint.
Browning-Ferris Industries of California v. NLRB
In Browning-Ferris, the D.C. Circuit agreed with the Board’s determination that an entity’s reserved or
indirect control over workers’ terms and conditions of employment should be considered when making
determinations about its joint employer status. In reaching its decision, the court conducted a de novo
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review of the common law, and did not defer to the Board’s judgment. The Supreme Court has held that
the Board and the courts are to apply common law principles of agency when determining whether an
entity is an “employer” under the NLRA. In this case, the D.C. Circuit maintained that interpreting the
meaning of the common law did not require deference to the agency. The court explained:
Congress delegated to the Board the authority to make tough calls on matters concerning labor
relations, but not the power to recast traditional common-law principles of agency in identifying
covered employees and employers. Instead, the inquiry into the content and meaning of the common
law is a “pure” question of law, and its resolution requires “no special administrative expertise that
a court does not possess.”
After reviewing the common law, including its own precedent, the D.C. Circuit maintained that there is
extensive support for considering an entity’s reserved or indirect control over workers when making joint
employer determinations. The court noted that an employer’s reserved right to control workers is relevant
evidence of a joint employer relationship and is consistent with traditional common law principles of
agency. Similarly, the court indicated that these common law principles do not require that control be
exercised directly and immediately to be relevant to the joint employer inquiry.
While the D.C. Circuit affirmed the Board’s 2015 joint employer standard, it remanded the case, finding
that the agency failed to distinguish between routine contract terms and aspects of indirect control that are
relevant to the question of Browning-Ferris’s joint employer status. For example, the court noted that the
ability to set the objectives, basic ground rules, or expectations for a third-party contractor like Leadpoint
“cast no meaningful light on joint-employer status.” Rather, the court emphasized that the Board should,
on remand, identify those aspects of indirect control that specifically bear on the workers’ essential terms
and conditions of employment. According to the court, this kind of analysis would “hew to the relevant
common-law boundaries that prevent the Board from trenching on the common and routine decisions that
employers make when hiring third party-contractors and defining the terms of those contracts.”
How the D.C. Circuit’s decision might affect the Board’s adoption of a new joint employer standard is not
certain. As noted, the court stated its view that the agency’s rulemaking must conform to common law
principles. As proposed, the standard appears to disavow the “extensive support” in the common law for
consideration of reserved or indirect control over workers’ terms and conditions of employment when
making joint employer determinations.
In light of the D.C. Circuit’s decision, proponents of a joint employer standard that focuses exclusively on
an entity’s direct and immediate control of workers’ terms and conditions of employment may look again
to Congress for a legislative solution. During the 115th Congress, the House of Representatives passed the
Save Local Business Act (SLBA), a bill that would amend the NLRA to recognize an entity as a joint
employer only if it “directly, actually, and immediately . . . exercises control over [a worker’s] essential
terms and conditions of employment[.]” Enactment of the SLBA would have superseded the common
law and Board determinations about when to identify an entity as a joint employer. The D.C. Circuit’s
decision could prompt the reintroduction of the SLBA or a similar proposal in the 116th Congress.
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Author Information
Jon O. Shimabukuro
Legislative Attorney
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