The Joint-Employment Standard in Limbo

One of the biggest issues in labor law over the past few years has involved a deceptively simple and fundamental concept: the definition of an employer. More precisely, the issue is when two or more employers can be considered joint employers, which means both are subject to legal requirements surrounding the status of an employer. The legal status of the standard has been in a tenuous position under Trump Administration’s National Labor Relations Board (NLRB), and now a proposed rule and a possible appeal of an NLRB decision to the U.S. Supreme Court could upend the existing standard for determining joint employer status for unionization purposes.

This issue has had renewed importance because over the last few decades companies have done everything possible to complicate employment relationships. Jobs that used to be held by their employees have been outsourced to third-party contracting firms and staffing agencies. Labor economist and former Administrator of the Wage and Hour Division of the U.S. Department of Labor David Weil has labeled this growing trend as “the fissured workplace,” analogizing the problem to “a fissure in a once solid rock that deepens and spreads.” This process results in third-party outsourcing companies starting, in turn, to outsource to other third-party companies.

In the fissured workplace, an outsider can never be quite sure if a worker in a particular workplace is actually employed by that workplace. As an example of the shift, Weil writes that “in 1960 most hotel employees worked for the brand that appeared over the hotel entrance.” He notes that “today more than 80 percent of staff are employed by hotel franchisees and supervised by separate management companies that bear no relation to the brand name of the property where they work.”

Similarly, in 2013 journalist Michael Grabell investigated the growth and concentration of temporary workers and the rise of “temp towns, ” which are “dense Latino neighborhoods teeming with temp agencies.” They are, he describes, “cities where it has become nearly impossible even for whites and African-Americans with vocational training to find factory and warehouse work without first being directed to a temp firm.”

For those who work in a fissured workplace, organizing a union can be especially tough. In order to illustrate why, it is worth contrasting the traditional workplace with the fissured workplace. In the traditional workplace, when a majority of workers vote to unionize, the law requires that the employer bargain in good faith with the union over the terms and conditions of employment. Theoretically, the same rules apply in a fissured workplace, however everything turns on if joint employers are both recognized as employers. This is because the contractors who directly employ the workers have little power to raise wages or change working conditions, unless the company that paid the contractor agrees. If the company that controls the worksite is a joint employer, however, both companies can be required to negotiate over those terms. The question of when a putative employer is categorized as a joint employer can make all the difference.

The NLRB has traditionally applied a common law test to determine when a joint-employment relationship exists, but starting in the 1980s it began adding requirements. Specifically the NLRB has required that a joint employer not only possesses the authority to control employees, but that it actually exercises that control. In the workplace, this distinction was essentially meaningless. As Andrew Strom, the Associate General Counsel for Local 32BJ of the Service Employees International Union, has remarked, “if your boss tells you he ‘hopes’ you will do something, you will probably do what he asks. The same goes for contractors and clients. If a client complains about a worker, the contractor will probably take action even without a direct order from the client.”

Recognizing this growing problem of the mismatch between the joint-employer test and the reality for workers, the NLRB, in its landmark decision in Browning-Ferris Industries of California in 2015, changed its test for determining when two employers constituted a joint employer. No longer would workers have to show that both employers exercised direct control over them; instead the NLRB recognized how power actually functions in the workplace and held that it would only require a showing that an employer had indirect or reserved control over the workers.

The NLRB recognized that, for 30 years, its decisions to add additional requirements were moving in exactly the opposite direction from what was required: “As the Board’s view of what constitutes joint employment under the Act has narrowed, the diversity of workplace arrangements in today’s economy has significantly expanded.” According to data from the most recent Contingent Worker Survey by the U.S. Bureau of Labor Statistics, for instance, there are approximately 2.3 million workers who work for contractors or temporary help agencies. This figure captures only a portion of the workers who could be found to have joint employers.

The NLRB under the Trump Administration has tried everything possible to undo the new joint-employer standard. First, in December 2017, during the last days of Board Chairman Philip A. Miscimarra’s tenure, the Board issued a decision in Hy-Brand Industrial Contractors which overturned the Browning-Ferris standard. Then, following an ethics report that one of the Republican members should not have participated in this case, the Board vacated Hy-Brand and reinstated Browning-Ferris. Having failed at changing the joint-employer test through case law, the Board then issued a proposed rule to overturn Browning-Ferris.

While all of this was going on, the original Browning-Ferris case was on appeal before the U.S. Court of Appeals for the D.C. Circuit. In late December 2018, the D.C. Circuit released its long-awaited decision and affirmed the NLRB’s use of the common law test in determining joint-employer status, explaining that the existence of “retained but unexercised control has long been a relevant factor in assessing the common-law master-servant relationship.”

The joint-employer test will now likely end up before the U.S. Supreme Court. The Supreme Court has only addressed the issue of joint employment under the NLRA once before, in 1964, when it held that independent contractor status is irrelevant and that a putative joint employer must possess “sufficient control over the work of the employees to qualify as a joint employer.” This statement is in line with the NLRB’s Browning-Ferris test.

The Supreme Court’s recent labor law cases, however, offer reason for concern. In the 2014 Harris v. Quinn case, the conservative majority of the Court articulated a narrow view of joint employment. The Court held that home health workers who were employed by both the state and disabled individuals were “partial” or “quasi” public employees. Justice Elena Kagan, joined in her dissent by her three liberal colleagues, took the majority’s circuitous logic to task for not recognizing the obvious, namely that “the majority describes the petitioners as ‘partial’ or ‘quasi’ public employees, a label of its own devising.” She continued by noting that “employment law has a real name—joint employees—for workers subject at once to the authority of two or more employers (a not uncommon phenomenon).”

The Harris majority decision was filled with analysis and dicta that helped the Court find several years later that fair-share fees in the public-sector were unconstitutional. Unfortunately, its analysis of joint employment in the case may provide some grounding for it to overturn the NLRB’s Browning-Ferris joint-employment test as well. If the Court sticks to its unworkably narrow standard, it would have enormous practical effects of pushing millions of workers outside the protections of labor law, while providing yet another incentive to subject workers to an unnecessarily complicated workplace arrangement.

Moshe Z. Marvit is a fellow at The Century Foundation.