Still-life of chairs in big stylish conferenceroom

In 2009, the James Brown compilation album The Godfather’s Smackdown, Live! was released. It’s a two-disc compilation of live shows from 1980. I never saw James Brown live, but I did see James Brown’s Celebrity Hot Tub.

On Friday, the D.C. Circuit Court of Appeals issued a different kind of smackdown, chastising the National Labor Relations Board (NLRB) for ignoring the Circuit Court’s earlier directive about the joint employer test. Believe it or not, this case is another chapter in the ongoing Browning-Ferris saga.

Much of Friday’s decision centered around facts specific to this case, including whether a revised joint employer test could be applied retroactively, but the Court of Appeals made a few things clear:

1. The NLRB’s joint employer test must always comport with the common law of agency.

2. The joint employer test has historically considered elements of reserved control, not just direct control. Reserved control means the right to control, even if not exercised. On this point, the Court was emphatic: “In our 2018 decision, we took great pains to inform the Board that the failure to consider reserved or indirect control is inconsistent with the common law of agency.”

3. The NLRB is free to change its mind and rearticulate the joint employer test, but only within the bounds of what is consistent with the common law of agency. In other words, whatever test the NLRB comes up with, “reserved or indirect control” needs to be part of the joint employment analysis.

What’s next?

The NLRB is Democrat-controlled. At its first opportunity, it will revert back to the indirect control test articulated in the 2015 Browning-Ferris decision. It will announce a new standard via rulemaking, a process that has already begun. A new test was scheduled to be released in July, so we can expect to see it any day now. The NLRB will also look for a joint employment dispute that provides it with a vehicle to announce and implement the new test by issuing a ruling about the test — just as it did in Browning-Ferris in 2015.

What does this mean for the new test?

The Circuit Court ruled that the test needs to comport with the common law principles of agency. The common law principles require taking into account the right to control, even if that control is not exercised. 

In crafting a new test, the NLRB may have some discretion to specify what factors should be considered when looking at control or the right to control. For example, it likely can dictate whether the right to control test applies only to essential terms and conditions of employment, such as hiring, firing and scheduling. But the NLRB (i.e., a future Republican-dominated NLRB) likely cannot issue a new rule requiring an exercise of “direct and immediate” control as a condition of joint employment. The right to control, even if not exercised, is engrained in the common law and must be part of the analysis, at least according to the D.C. Circuit. “Reserved or indirect control” must be considered.

What is the impact of being named a joint employer under the National Labor Relations Act? Here are a few consequences.

1. A union may be able to organize a group of workers that includes your direct employees and a subcontractor or staffing agency’s employees.

2. If a subcontractor’s employees are unionized and you’re a joint employer, you have a duty to bargain too. Welcome to the bargaining table.

3. If a subcontractor’s employees are unionized and you’re a joint employer, your duty to bargain will cover terms and conditions of employment that you’re used to controlling on your own. Now you’ll often have to involve the union before making changes that affect the workplace.

4. If a subcontractor’s employees strike or picket and you’re a joint employer, they can strike or picket you too, and they’re fully protected under the NLRA. If the picketers were not your joint employees, you’d have illegal secondary picketing and you can take action, but if you’re a joint employer, you’ll have to grin and bear it.

Employers should plan ahead. Expect the NLRB to find joint employment when a company retains the right to control the workers of a subcontractor or staffing agency, even if actual control is minimal. We should learn more in the coming days when a new proposed rule is released.

Todd Lebowitz leads BakerHostetler’s Contingent Workforce team and focuses his practice on protecting businesses against independent contractor misclassification and joint employment risks.