A Rule with A Skew: The National Labor Relations Board Prepares Itself for Challenges To Proposed Rulemaking

By Chris Southcott*

On September 14, 2018, the National Labor Relations Board (NLRB or “the Board”)  published in the Federal Register a Notice of Proposed Rulemaking (NPRM) setting forth a proposed standard for determining joint-employer status under the National Labor Relations Act.[i] A joint employer may be required to bargain with a union representing jointly employed workers, could be subject to joint and several liability for unfair labor practices or other violations of the NLRA committed by the other employer, including some whistleblower claims, and may be subject to picketing that would otherwise be unlawful.[ii] Currently, the Board’s position is that two or more entities are joint employers of a single workforce if (1) they are both employers within the meaning of the common law; and (2) they share or codetermine those matters governing the essential terms and conditions of employment.[iii] In evaluating whether an employer possesses sufficient control over employees to qualify as a joint employer, the Board will – among other factors — consider whether an employer has exercised control over terms and conditions of employment indirectly through an intermediary, or whether it has reserved the authority to do so.[iv]

Initially, the period for notice and comment was to terminate after sixty days on November 13, 2018, however — in response to requests from multiple members of Congress and several unions — the NLRB extended the notice and comment period for an additional thirty days to December 13, 2018.[v]

The decision to pursue policy via rulemaking marked a significant shift in focus for an agency that historically has focused almost exclusively on adjudication as a means of handling its business.[vi] This shift is not accidental. Since his swearing-in earlier in 2018, Chairman John F. Ring has declared his interest in rulemaking, noting in a Wall Street Journal op-ed piece that he has “been a vocal proponent of using rulemaking to provide more clarity, predictability and stability in our labor law.”[vii]

The proposed rule stems from the chaos that erupted after a complex series of agency adjudications and reversals. In an August 2015 adjudication, Browning- Ferris Industries of California, Inc., d/b/ a BFI Newby Island Recyclery, by a 3-2 vote, the Board overruled longstanding precedent and substantially relaxed the evidentiary requirements for finding a joint-employer relationship.[viii] Then, in a December 2017 adjudication, Hy-Brand Industrial Contractors, Ltd., a different Board majority — also by a 3-2 vote —restored the prior, more stringent standard.[ix] However, the Board would vacate that decision in February 2018 after the charging parties in Hy-Brand filed a motion for reconsideration arguing a conflict-of-interest issue because Board member William J. Emanuel’s former law firm had played a key role in a related case.[x] Consequently, the order effectively changed the law back again to the relaxed standard of Browning-Ferris.[xi] Further complicating matters, a petition for review challenging Browning-Ferris’s adoption of the relaxed standard as beyond the Board’s statutory authority is currently pending in the United States Court of Appeals for the District of Columbia Circuit.[xii]

In May, the NLRB announced that it was considering rulemaking on the issue.[xiii]  Perhaps unsurprisingly given the divisive nature of the agency,[xiv] powerful political figures took notice. In a May 29 letter to Chairman Ring, three senators (Elizabeth Warren, Kirsten Gillibrand, and Bernie Sanders) expressed concern that the proposed rulemaking “appears designed to evade the ethical constraints that federal law imposes on Members in adjudications.”[xv] The letter also accused the Board of turning to rulemaking as a last resort given the failures to resolve the matter via adjudication, noting that the timing and subject matter of the Board’s proposed rule “suggests that it is driven to obtain the same outcome sought by Member Emanuel’s former employer and its clients, which the Board failed to secure by adjudication.”[xvi]

The letter also laid the legal groundwork for a potential future lawsuit should the rule survive notice and comment rulemaking. The Senators said Chairman Ring had “prejudged” the outcome of the rulemaking, noting that he has tweeted that “uncertainty over the [Browning-Ferris] standard undermines job creation and economic expansion.”[xvii] An allegation of prejudgement matters because it is prohibited under existing administrative law as a violation of due process.[xviii] The dominant method courts have utilized for determining prejudgement is the (beautifully-named) Cinderella test, wherein a court analyzes objectively an agency’s actions to determine whether “a disinterested observer may conclude that [the agency] has in some measure adjudged the facts as well as the law of a particular case in advance of hearing it.”[xix]

While Chairman Ring’s statements seem innocuous, they become potentially problematic in light of a bizarre Congressional enactment from the 1940s that expressly banned the “appoint[ment of] individuals for … economic analysis.”[xx] Thus, the senators’ letter raises potential legal challenges to the rule based on Ring’s tweet, which the senators conclude must be either an anecdotal statement of the current law indicating that the Chairman had presumed the proposed rule to be valid, or an economic analysis.[xxi] Either way, the letter flags a potential legal challenge for the agency’s proposed rule as the former interpretation of Ring’s tweet indicates that the Board has closed its mind to potential responses that might occur from the notice and comment rulemaking process, while the latter interpretation accuses Ring of engaging in economic analysis prohibited by federal statute.[xxii]

So, if enacted, what exactly would the NLRB’s proposed rule do? In seeking to define what constitutes a joint employer, the proposed rule says:

an employer may be considered a joint employer of a separate employer’s employees only if the two employers share or codetermine the employees’ essential terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction. A putative joint employer must possess and actually exercise substantial direct and immediate control over the employees’ essential terms and conditions of employment in a manner that is not limited and routine.[xxiii]

 

In layman’s terms, the new definition of a joint employer adds the word “substantial” to the words “direct and immediate” in listing the criteria for whether a company exercises enough control to be considered a joint employer, language that would be significantly harsher than even the pre-Browning-Ferris standard.[xxiv] Consequently, the proposed rule would make it harder for employees to fall under the purview of the NLRA, making unionization even more difficult for workers that are in less-secure employment situations, such as those working in fast-food restaurants and hotel chains.[xxv]

Given the increasingly partisan political environment, one would expect a lawsuit that challenges the legality of any rule from the NLRB that emerges from the notice and comment process. Despite the availability of substantive rulemaking to the Board, since 1991 the agency has only successfully engaged in two substantive rulemakings.[xxvi] Against the current political background, then, the chances of this Board successfully enacting a third substantive rulemaking seem slim.

* Chris Southcott is an Associate Editor on MJEAL. He can be reached at sochrist@umich.edu.


The views and opinions expressed in this blog are those of the authors only and do not reflect the official policy or position of the Michigan Journal of Environmental and Administrative Law or the University of Michigan.

[i] The Standard for Determining Joint Employer Status, 83 Fed. Reg. 46681 (proposed September 14, 2018) (to be codified at 29 C.F.R. pt. 103).

[ii] Browning- Ferris Industries of California, Inc., d/b/ a BFI Newby Island Recyclery, 362 NLRB No. 186 (2015) (Browning-Ferris), petition for review docketed Browning- Ferris Indus. of Cal. v. NLRB, No. 16– 1028 (D.C. Cir. filed Jan. 20, 2016).

[iii] Id. at 12-15.

[iv] Id. at 11-15.

[v] N.L.R.B., Extension of Time to Submit Comments (October 30, 2018), https://www.nlrb.gov/sites/default/files/attachments/news-story/node-6886/ordergrantingeottofilecommentstonprmregardingthestandardfordeterminingjoint-employerstatus.pdf.

[vi] See, e.g., Jeffrey S. Lubbers, The Potential of Rulemaking by the NLRB, 5 FIU L. REV. 412 (2015) (noting that the Board has only “issued a smattering of procedural, privacy, and housekeeping rules” during the last twenty years).

[vii] John F. Ring, Letter to the Editor, The NLRB’s Rule-Making Follows the Rules, Wall St. J., Sept. 24, 2018, at A18.

[viii] Browning- Ferris Industries of California, Inc., d/b/ a BFI Newby Island Recyclery, 362 NLRB No. 186 (2015) (Browning-Ferris), petition for review docketed Browning- Ferris Indus. of Cal. v. NLRB, No. 16– 1028 (D.C. Cir. filed Jan. 20, 2016).

[ix] Hy-Brand Industrial Contractors, Ltd., vacated, 365 NLRB No. 156 (2017).

[x] Hy-Brand Industrial Contractors, Ltd., vacated, 365 NLRB No. 156 (Order of February 28, 2018 vacating the decision).

[xi] Id.

[xii] Browning- Ferris Industries of California, Inc., d/b/ a BFI Newby Island Recyclery, 362 NLRB No. 186 (2015) (Browning-Ferris), petition for review docketed Browning- Ferris Indus. of Cal. v. NLRB, No. 16– 1028 (D.C. Cir. filed Jan. 20, 2016).

[xiii] N.L.R.B., NLRB Considering Rulemaking to Address Joint-Employer Standard, (May 9, 2018), https://www.nlrb.gov/news-outreach/news-story/nlrb-considering-rulemaking-address-joint-employer-standard

[xiv] See, e.g., Charlotte Garden, Toward Politically Stable NLRB Lawmaking: Rulemaking Vs. Adjudication, 64 Emory L. J. 1472 (2014-15) (noting that the Board has historically been “a flashpoint for controversy”)

[xv] Letter from Senator Elizabeth Warren, Senator Kirsten Gillibrand, and Senator Bernard Sanders to Chairman John F. Ring (May 29, 2018),  https://www.warren.senate.gov/imo/media/doc/2018.05.29%20Letter%20to%20NLRB%20on%20Joint%20Employer%20Rulemaking.pdf

[xvi] Id.

[xvii] Id. (Internal quotation marks omitted)

[xviii] See e.g., Texaco, Inc. v. Federal Trade Commission, 336 F.2d 754 (D.C. Cir. 1964) (invalidating the FTC’s decision and holding that by appearing to have adjudged the specific facts as well as the law of the case in advance of hearing the evidence, the chairman denied respondents their due process).

[xix] Cinderella Career & Finishing School v. Federal Trade Commission, 425 F.2d 583 at 591 (D.C. Cir. 1970) (alteration in original) (quoting Gilligan, Will & Co. v. Sec. Exch. Comm’n, 267 F.2d 461 at 469 (2d Cir. 1959)). For an alternative “irrevocably closed” test occasionally utilized by courts, see e.g., Madison River R.V. Ltd. v. Town of Ennis, 994 P.2d 1098 at 1100 (Mont. 2000) (stating unequivocally that “to prevail on a claim of prejudice or bias against an administrative decision maker, a petitioner must show that the decision maker had an ‘irrevocably closed’ mind on the subject under investigation or adjudication”).

[xx] See 29 U.S.C. § 154(a). For an explanation of the history and problematic ramifications of the statute, see Hiba Hafiz, Economic Analysis of Labor Regulation, 2017 Wis. L. Rev. 1115.

[xxi] Letter from Senator Elizabeth Warren, Senator Kirsten Gillibrand, and Senator Bernard Sanders to Chairman John F. Ring (May 29, 2018), https://www.warren.senate.gov/imo/media/doc/2018.05.29%20Letter%20to%20NLRB%20on%20Joint%20Employer%20Rulemaking.pdf

[xxii] Id.

[xxiii] The Standard for Determining Joint Employer Status, 83 Fed. Reg. 46681 at 46696 (proposed September 14, 2018) (to be codified at 29 C.F.R. pt. 103)

[xxiv] Id.

[xxv] Noam Schreiber, Labor Board Moves Anew to Limit Employers’ Workplace Liability, N.Y. Times, Sept. 13, 2018, at B6

[xxvi] see Hiba Hafiz, Economic Analysis of Labor Regulation, 2017 Wis. L. Rev. 1115 at 1130.

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