Outten & Golden: Empowering Employees in the Workplace

Should Workers Be Punished for Being Employed By Subcontractors? This Legal Battle Will Decide.

January 10th, 2019 | Moshe Marvit

Over the last few decades, a growing number of American workers have effectively lost many of their labor rights because of the way their bosses structure the employment relationship. These workers are contractors who are hired by one company but work for another: the Hyatt Hotel housekeepers who actually work for Hospitality Staffing Solutions, the Microsoft tech workers who actually work for a temp agency called Lionbridge Technologies, and the Amazon warehouse workers who actually work for Integrity Staffing Solutions. These workers often perform the same work at the same place as other workers, frequently on a permanent basis.

But because their employers have entered into complicated contracts with each other, these workers have been unable to exercise their labor rights. If the workers can only bargain with the staffing company and not the lead company where they actually work, they are negotiating with the party that often has no power to change the terms of their employment. For that reason, workers have fought for a more inclusive definition under the National Labor Relations Act of what constitutes an employer—and when two employers are joint employers.

Recently, the Washington, D.C. Circuit Court of Appeals issued a major ruling that was a win for workers, and now this issue seems destined for the Supreme Court. As the legal battle heats up, workers everywhere should be paying close attention, since their livelihoods—or unions—could be affected.

Contracting expands as workers’ rights shrink

Under a traditional employment relationship, workers have one employer who has the power to hire, fire, pay, supervise and direct them. If such workers form a union, the law requires the employer to recognize the union and bargain in good faith. (Employers routinely violate the law and suppress workers’ labor rights, but workers at least have a theoretical path to collective bargaining.) Workers also have the right to picket and engage in other disruptive activities when they have a labor dispute with that employer.

However, there is a growing group of blue-collar, white-collar and service workers who find themselves working for two employers, either through contractors or temporary help firms. “In 1960 most hotel employees worked for the brand that appeared over the hotel entrance,” David Weil, former adminstrator for the Department of Labor Wage and Hour, explains in his 2014 book, The Fissured Workplace. “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.”

For those who work in a fissured workplace, organizing a union can be especially tough. The contracting firms have little power to raise wages or change working conditions, unless the company that controls the worksite agrees. Therefore, workers need both employers at the bargaining table.

Starting in 1984, the National Labor Relations Board (NLRB) began imposing difficult requirements to show that two employers are joint employers. By 2002, the NLRB was requiring that it be shown that the putative joint employer exercises direct and immediate control over employment matters. This meant that even when a company hired workers through a staffing agency to work at its site, chose the number of workers, gave specific work assignments and directions, and exercised supervision, it was not found to be a joint employer. Workers could, of course, form a union to negotiate with the staffing agencies, but those agencies usually have little room to maneuver alone.

Obama’s labor board

Recognizing this growing problem, in 2015 the NLRB changed the test to determine when two employers constitute a joint employer in its landmark Browning-Ferris Industries decision. No longer would workers have to show that both employers exercise direct control over them. Instead the NLRB recognized how power actually functions in the workplace and ruled that it would only require a showing that an employer had indirect or reserved control over the workers.

In its ruling, the NLRB recognized that for 30 years its approach to continuously adding requirements was 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.” And indeed, according to data from the Bureau of Labor Statistics’ most recent Contingent Worker Survey, there are approximately 2.3 million workers who work for contractors or temporary help agencies, and this figure captures only a portion of those that one could reasonably find have joint employers.

The NLRB’s new Browning-Ferris test looked at whether two employers actually share or codetermine employment matters by also considering reserved or indirect control. Therefore, an employer could no longer avoid its liabilities and obligations by structuring its power in an indirect fashion. James Hoffa, the president of the Teamsters, the union that represented Browning-Ferris workers, said at the time, “This decision will make a tremendous difference for workers’ rights on the job. Employers will no longer be able to shift responsibility for their workers and hide behind loopholes to prevent workers from organizing or engaging in collective bargaining.”

Similarly, employer-side attorneys recognized the scope of the decision. In their dissent in Browning-Ferris, NLRB Members Philip Miscimarra and Harry Johnson wrote that the decision was “the most sweeping of recent major decisions. Attorney Marshal B. Babson who represented the U.S. Chamber of Commerce in its opposition to this case, said at the time, “The decision today could be one of the more significant by the NLRB in the last 35 years. Depending on how the board applies its new ‘indirect test,’ it will likely ensnare an ever-widening circle of employers and bargaining relationships.”

The right strikes back

Reaction among corporate groups and Republicans was immediate, severe and comprehensive. Within two weeks, both House and Senate Republicans had introduced the Protecting Local Business Opportunity Act, which would amend the National Labor Relations Act to define joint employers as those who “directly, actually and immediately” exercise control. In 2017, the House passed its version of the bill in a vote that fell largely along party lines.

Once the NLRB came under Republican control and was presented with a case that touched upon the joint employer question, the NLRB, in the Hy-Brand case, overruled Browning-Ferris. This decision was so potentially damaging to workers that former NLRB Member and current executive director of the Labor and Worklife Program at Harvard Law School, Sharon Block, wrote that the decision constituted part of a “December Massacre.” 

But then, on February 9, 2018, the NLRB Inspector General issued a memorandum that determined that there was a “serious and flagrant problem and/or deficiency” in the NLRB’s deliberations surrounding the Hy-Brand case. Specifically, the memorandum found that Hy-Brand was effectively a “do-over for the Browning-Ferris parties,” and since NLRB Member William Emanuel’s former law firm represented Browning-Ferris in that case, he should have recused himself. Following this memorandum and Emanuel’s recusal, the NLRB unanimously vacated its Hy-Brand decision that overruled Browning-Ferris—and announced that Browning-Ferris was still good law.

The fight heats up

The Republican-controlled NLRB, intent on overturning the Browning-Ferris decision, decided to pass a rule redefining joint employers under its rarely used administrative rule-making authority. But since administrative rules require the agency to go through a series of steps and collect public comments, this rule will likely take years to become final. 

On December 28, 2018, the Washington, D.C. Circuit Court of Appeals, which, according to The New York Times, is “widely views as second in importance only to the Supreme Court,” released its long-awaited decision on the Browning-Ferris appeal. The Court issued an important and unqualified win for workers in affirming the NLRB’s 2015 Browning-Ferris decision, agreeing with the NLRB that its new Browning-Ferris test was firmly grounded in the common law. Using the unfortunate legal language of “master-servant,” the Court explained that “retained but unexercised control has long been a relevant factor in assessing the common-law master-servant relationship.”

The court fully affirmed the NLRB’s new Browning-Ferris joint employer test, but it sent the case back to the NLRB, because the NLRB did not fully apply its new test to all the facts of the particular case. This means that the NLRB must use its Browning-Ferris test going forward, which is good news for labor rights. 

The case is now headed to the NLRB, but that is unlikely to be the end of the road for this major issue. It is quite possible that this matter will eventually end up before the U.S. Supreme Court, and this should be cause for some concern among workers. The Supreme Court currently has an ultra-conservative majority, which has shown no hesitation in rewriting decades of law in support of employers in labor cases. As recently as 2014, the conservative majority of the Supreme Court engaged in a bizarre misreading of the definition of joint employer in order to deny labor rights to home healthcare workers. With the addition of Brett Kavanaugh, the Court has become more conservative since that time. Labor may have won this latest battle, but the fight is far from over.

This article was originally published at ThinkProgress on January 10, 2019. Reprinted with permission. 

About the Author: Moshe Z. Marvit is an attorney and fellow with The Century Foundation and the co-author (with Richard Kahlenberg) of the book Why Labor Organizing Should be a Civil Right.

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