In a move certain to disappoint the business community, a federal appeals court today upheld an Obama-era test to determine whether the relationship between a business and the employees of its contractor or franchisee qualifies as joint employment.
The much-anticipated decision largely affirmed the NLRB’s 2015 Browning-Ferris ruling, which made it easier to classify a business a joint employer, jointly liable for any labor violations committed by a different business with which it’s affiliated.
A three-judge panel of the D.C. Circuit Court of Appeals split on the issue in an 80-page opinion that included a lengthy dissent.
The majority held that the board’s consideration of a business’s “right to control” over the worker in question had “deep roots in the common law.” The court also upheld the NLRB’s inclusion of “indirect control” in its test.
But the majority found the board’s chosen standard for indirect control was inconsistent with common law, and remanded the case for further consideration on that point.
The Trump administration has sought to roll back the Obama-era joint employment standard, which is opposed by franchisers. The administration published a proposed rule in September that would revert to the pre-Obama standard, which made it somewhat more difficult to hold franchisers liable for labor violations committed by franchisees.
The Trump NLRB rescinded the Obama-era standard a year ago but later reversed course amid questions of ethical misconduct involving a board member.
The two judges who ruled in the majority were Obama appointees. Judge Arthur Randolph, an appointee of former President George H.W. Bush, issued a scathing dissent.
“The majority opinion misstates the common law, misframes the questions in the case, and adds to the uncertainty the board’s Browning-Ferris decision has generated,” he wrote.
According to POLITICO, more than a dozen business groups filed a petition Wednesday that provides some guidance to the NLRB as it prepares a rule to establish a new, more business-friendly definition of joint employment.
The business groups — including the Chamber of Commerce, the International Franchise Association and the HR Policy Association — suggested that the NLRB to require that any business classified as a joint employer (and therefore jointly liable for labor violations committed by its contractors and franchisees) must have “direct and immediate” control over the employees in question. “‘Essential terms and conditions of employment,’” the groups said in draft language obtained by Morning Shift, “shall mean the hiring, promotion, discipline and discharge of employees; determination of individual employee rates of pay and benefits; engaging in the day-to-day supervision of employees, and assigning to employees their individual work schedules, positions, and tasks.” More here.
SUGGESTED PROPOSED RULE
Petitioners respectfully petition the Board to promulgate and issue the following rule,
pursuant to its authority granted by Sections 6 and 9 of the Act8:
“The Board may consider a person to be an employer in relation to an employee within the meaning of Section 2(2) of the National Labor Relations Act only if such person actually exercises direct and immediate control over the essential terms and conditions of the employment of such employee, and if the exercise of such control is more than limited and routine in nature.
“Essential terms and conditions of employment” shall mean the hiring, promotion, discipline and discharge of employees; determination of individual employee rates of pay and benefits; engaging in the day-to-day supervision of employees, and assigning to employees their individual work schedules, positions and tasks. Essential terms and conditions of employment shall not include any of the following: actions, policies or programs intended (1) by any franchisor to maintain or enforce the brand protection standards required of persons who enter into franchising arrangements with such franchisor; (2) by any entity to
implement or administer any social responsibility code or policy, including safety policies, with respect to suppliers, vendors or other entities with whom it has a business relationship; (3) by any entity to require compliance by its suppliers, vendors or other entity with whom it has a business relationship with any federal, state or local law, regulation or other legal requirement; (4) by any entity to
establish time parameters when the activity or work in question is to be performed; (5) by any entity to establish quality or outcome standards for any activity or work performed for such entity; (6) by any entity to require an individual to wear any type of uniform or any other type of identification that mentions in any manner the entity for which the activity or work is being performed; (7) by any entity to maintain or enforce product, brand, or reputational protection standards for its products, goods or services; and (8) to implement third party delivery and courier services, or technology-based shared staffing applications (including, but not limited to, insurance, training, financing and leasing services).
In no event shall retained or reserved but unexercised control over essential terms and conditions of employment, or the exercise of indirect control over essential terms and conditions of employment, constitute or be evidence of joint employer status under the Act.”
POLITICO Pro is reporting on a couple of interesting cases developing out the restaurant industry. One is a potential joint employer settlement between McDonald’s and the NLRB. The other an odd case where a judge holds a Chipotle worker to be in contempt of court over a suit filed under the Obama administration’s overtime rule.
McDonald’s submitted a settlement with the NLRB general counsel to the administrative law judge presiding over its joint-employer case, according to two sources close to both sides in the case.
The NLRB’s Office of the General Counsel sued McDonald’s during the Obama administration, alleging it was jointly liable for the firing of McDonald’s workers employed by its franchisees. But in January a new Trump-appointed general counsel requested a pause in the trial to explore a potential settlement.
Matt Haller, the chief lobbyist for the International Franchise Association, confirmed that McDonald’s submitted its proposed settlement to the court this morning, as did a person close to the workers’ side. The NLRB did not immediately respond to requests for comment.
McDonald’s pushed to settle after the board overturned the Obama-era board’s joint employer standard in December, making it harder to hold the company liable for labor violations committed by its franchisees. But the board withdrew that pro-business decision in February after the NLRB’s inspector general said that William Emanuel, a Trump appointee, shouldn’t have participated due to a conflict of interest.
The fast-food company presented the settlement “as a done deal,” according to the person close to the workers, “but the judge was very clear it’s not done until she says so.” Administrative law Judge Lauren Esposito gave the charging parties 24 hours to decide how much time they need to prepare for a hearing on the settlement.
Pro-business groups are pushing to include a joint employment fix in the omnibus bill expected to come out tonight. Their bill, H.R. 3441 (115), would codify the more pro-business joint employment standard into law.
“The McDonald’s case does nothing to settle the uncertainty for franchisers and franchisees and address the broader question of joint employment,” Haller said.
A federal judge in Texas today held a Chipotle worker in contempt by bringing a suit against the Mexican restaurant chain for back pay under the Obama administration’s overtime rule.
The worker filed a lawsuit against Chipotle last year, arguing that the company withheld time-and-a-half pay under the Obama administration’ rule, even though the rule never took effect because the same court issued an injunction. Attorneys for the worker argued that their lawsuit wasn’t a violation of the court’s order because the court, in issuing an injunction against enforcement, didn’t stop the rule itself from taking effect. They also argued the federal injunction didn’t stop lawsuits under state law.
The judge didn’t agree with that argument and ordered the worker to withdraw the complaint and pay Chipotle’s legal fees.