Since the National Labor Relations Board’s (“NLRB” or the “Board”) 2015 decision in Browning-Ferris Industries, 362 NLRB No. 186, in which it adopted a new, far less stringent test for determining joint-employer status under the National Labor Relations Act (“NLRA”),  employers have been left wondering whether they may be held to be a joint employer of temporary or contract workers that they retain through staffing and temporary agencies.

These concerns have been echoed by employers in other contexts as other agencies, such as the United States Department of Labor (“DOL”) and the Equal Employment Opportunity have taken similar positions, seeking to expand the concept of joint employer with respect to statutes and regulations they enforce. Notably, both the DOL and the EEOC filed amicus briefs in support of the NLRB’s position with the D.C. Circuit Court of Appeals, which is considering whether the NLRB exceeded its statutory authority in Browning-Ferris.

While the loosened standards for determining joint employment remain under consideration by the courts, members of Congress are now seeking to use the power of the purse strings to force the NLRB to discontinue its use of the relaxed standards it adopted in Browning-FerrisLegislation considered yesterday by House Republicans would do away with this expansion of joint employer liability and provide much needed clarity for employers on this issue.

What is the NLRB’s Browning-Ferris Standard for Finding Joint-Employer Status?

The Browning-Ferris decision expanded the definition of joint-employer to hold that if an employer, referred to as the primary employer, merely possesses, but does not exercise, the right or ability to directly or indirectly codetermine the terms and condition of employment of the employees of another employer, referred to as the secondary employer, the primary employer will be held to be the joint-employer of the secondary employer’s employees.

This holding impacts a wide range of workers, such as employees of business arrangements including the use of contractors, retention of personnel through staffing agencies and temporary employment services, and, if the “primary employer is a franchisor, personnel employed by the franchisor’s franchisees. As the Board pointed out when it decided Browning-Ferris, in its view “the current economic landscape,” which includes some 2.87 million people employed by temporary agencies, warrants a “refined” standard for assessing joint-employer status. As the majority put it: “If the current joint-employer standard is narrower than statutorily necessary, and if joint-employment arrangements are increasing, the risk is increased that the Board is failing what the Supreme Court has described as the Board’s ‘responsibility to adapt the Act to the changing patterns of industrial life.’”

While the National Labor Relations Board’s ruling in Browning-Ferris is now before the United States Court of Appeals for the District of Columbia Circuit, where the court has been asked to find that the NLRB’s test is not supported by the terms of the NLRA or the common law definition of employer, which is an element of the Browning-Ferris standard itself, recent activity from House Republicans may result in legislative action establishing a new, far narrower standard for determining joint-employer status.

Congress Seeks to Use the Appropriation Process to Force the Board to Discard Browning-Ferris’s Indirect Control Standard

House Republicans have introduced new language in a draft spending bill – that among other things, would set the NLRB’s appropriation for 2018 – to direct the Board to set aside what many in the business community find to be one of the most objectionable parts of Browning-Ferris.

The House Education and Workforce Committee held a hearing on Wednesday, July 12, 2017 to discuss the barriers to job and business growth created by the “indirect control” standard of joint employer liability. Small business owners and other employer representatives testified that the joint employer standard threatens their ability to expand, and encouraged the committee to introduce legislation that would define employees as those workers that the employer has direct or actual control over.

On Thursday, July 13, 2017, the House Appropriations Committee on Labor, Health and Human Services, and Education voted along strict party lines to approve a markup of their draft spending bill for FY 2018, which would prohibit the NLRB from using the “indirect control” standard in making joint employer determinations and would require the Board to revert to the “direct control” standard. The Appropriations Committee describes the legislation in its press release and on its website as including

two policy provisions to stop the NLRB’s harmful anti-business regulations. The provisions include: A provision that prohibits the NLRB from applying its revised “joint-employer” standard in new cases and proceedings; A provision that prevents the NLRB from exercising jurisdiction over Tribal governments.

This provision, along with the Committee’s proposal to reduce the NLRB’s budget by $25 million (from $274 million to $249 million) will face strong opposition from the Democratic minority, organized labor, unions, and employee lobbying groups. Of course at this point it is not at all clear whether in fact there will actually be a budget for the new fiscal year or, instead, Congress will again adopt a continuing resolution to keep the government running.

What Should Employers Do Now?

Employers and their representatives should of course continue to pay close attention to the budget process and other legislative action, while waiting for Congress to take action on the President’s nominees to the two vacant seats on the NLRB.   There is every reason to believe, assuming Willian Emanuel and Marvin Kaplan are confirmed and take their seats on the Board, that they, like Chairman Philip Miscimarra, who wrote a vigorous dissent in Browning-Ferris, will share the Chairman’s belief that the standard adopted in that case was incorrect and should be set aside. At this time, however, it would be nothing more than speculation to predict when the new Board majority will have an actual case before it in which these issues are present.

In the meantime, employers are advised to review the full range of their operations and personnel decisions, including their use of contingent and temporary personnel supplied by staffing and similar agencies to assess their vulnerability to such action and to determine what steps they make take to better position themselves for the challenges that are surely coming.

Equally critical, employers should carefully evaluate their relationships with suppliers, licensees, and others with which they do business to ensure that their relationships, and the agreements, both written and verbal, governing those relationships do not create additional and avoidable risks.

This post was written with assistance from Sean Winker, a 2017 Summer Associate at Epstein Becker Green.

On April 25, 2017, Dorothy Dougherty, Deputy Assistant Secretary of the Occupational Safety and Health Administration (“OSHA”) and Thomas Galassi, Director of OSHA’s Directorate of Enforcement Programs, issued a Memorandum to the agency’s Regional Administrators notifying them of the withdrawal of its previous guidance, commonly referred to as the Fairfax Memorandum, permitting “workers at a worksite without a collective bargaining agreement” to designate “a person affiliated with a union or community organization to act on their behalf as a walkaround representative” during an OSHA workplace investigation.

The Lawsuit Challenging the Participation of Union Representatives in OSHA Inspections

Two days later, on April 27, 2017, the National Federation of Independent Business filed a  with the United States District Court for the Northern District of Texas, effectively declaring victory in their lawsuit challenging the issuance of the Fairfax Memorandum as being inconsistent with and unsupported by the Occupational Safety and Health Act, and the regulations issued under it allowing for the limited participation of third party experts during OSHA conducted workplace safety inspections.

For readers who have been following this issue and the litigation, the withdrawal of the Fairfax Memorandum and the plaintiff’s decision to discontinue their law suit should come as no surprise. This past February, the court denied OSHA’s motion to dismiss the lawsuit challenging the Fairfax Memorandum and OSHA’s decision to allow the participation of union representatives in non-union workplaces, finding that the plaintiff had “stated a claim upon which relief can be granted,” and that “the [Fairfax Memorandum] flatly contradicts a prior legislative rule as to whether the employee representative” in such a walk-around inspection “must himself be an employee.”

OSHA and the DOL’s Decision to Withdraw the Fairfax Memorandum

Less than a week later, OSHA filed an Unopposed Motion For Extension of time to answer the complaint in the Federation’s lawsuit, explaining to the Court that “the extension of the deadline for defendants to answer is necessary to allow incoming leadership personnel at the United States Department of Labor adequate time to consider the issues.”

The Memorandum withdrawing the Fairfax Memorandum reiterates the requirements of 29 CFR 1903.8 (c) that an employee representative who accompanies an OSHA representative during a walkaround workplace inspection “shall be an employee of the employer,” and that the only exceptions in which a non-employee may participate is “where good cause is shown” and the participation of a non-employee, such as an industrial hygienist or a safety engineer” is “reasonably necessary to the conduct of an effective and thorough inspection of the workplace” in the judgment of the OSHA Compliance and Safety Health Officer conducting the examination. Notably, however, rather than actually stating that the Fairfax Memorandum was inconsistent with the provisions of the statute or the OSHA regulations, the April 25th memorandum simply refers to it as “unnecessary.”

What this Means for Employers

First and foremost, OSHA’s issuance of the April 25th memorandum makes clear that union representatives who are not the certified or recognized bargaining representative of the employees at a facility to be inspected by OSHA have no legal right to participate in such inspections.  Accordingly, it is equally clear that an employer faced with such an inspection at a facility that a union is seeking to organize should understand that the union’s representatives have no right to participate.

An important effect of the withdrawal of the Fairfax Memorandum will be to deny unions a potentially potent tool for organizing. As Judge Fitzwater described in his Memorandum and Order denying OSHA’s motion to dismiss the Federation’s lawsuit in February, unions such as the UAW in its ongoing organizing campaign at Nissan in Tennessee have come to rely upon participation in OSHA inspections as a valuable tool.

No doubt with the confirmation of Secretary Acosta, leadership of the Department of Labor will continue to review and reassess positions and actions taken during the past eight years.

A United States District Court in Texas has refused to dismiss a law suit challenging OSHA’s practice of allowing union representatives and organizers to serve as “employee representatives” in inspections of non-union worksites. If the Court ultimately sustains the plaintiff’s claims, unions will lose another often valuable organizing tool that has provided them with visibility and access to employees in connection with organizing campaigns.

The National Federation of Independent Business (‘NFIB”) filed suit to challenge an OSHA Standard Interpretation Letter (the “Letter”), which sets forth the agency’s position that an employee of a union that does not represent the workers at the site may accompany the OSHA representative conducting an inspection. The Federation argued on behalf of itself and one of its members because OSHA had permitted a representative of the Service Employees International Union (“SEIU”) to accompany him despite the fact the SEIU did not represent the workers at the facility. The lawsuit asserts that in allowing this, OSHA had violated its own rules and gave the union rights that it did not have under the law. In the Letter, issued in February 2013, OSHA gave a new definition of “reasonably necessary,” which supported its holding, for the first time, that a third party’s presence would be deemed “reasonably necessary,” if OSHA concluded that the presence of the third party “will make a positive contribution” to an effective inspection. The NFIB’s lawsuit contradicted both the OSHA statute itself and OSHA regulations issued in 1971 following formal rulemaking.

While OSHA asked the Court to dismiss the lawsuit, claiming that the NFIB lacked standing to bring the lawsuit because it could not demonstrate that it had been harmed, and that the lawsuit was procedurally flawed for a number of other reasons as well, Judge Sidney A. Fitzwater denied the U.S. Department of Labor’s Motion to Dismiss, finding that “NFIB as stated a claim upon which relief can be granted,” and that “the Letter flatly contradicts a prior legislative rule as to whether the employee representative” in such a walk-around inspection “must himself be an employee.”

The rule Judge Fitzwater referred to, 29 U.S.C Section 1903.8(c) contained OSHA’s policies for what are referred to as “safety walk-arounds,” which are on site workplace inspections. The Letter gives employees in the workplace the right to have a representative present during such an inspection. OSHA’s own rules make clear that such “authorized representative(s) shall be an employee(s) of the employer,” but that when “good cause is shown why accompaniment by a third party who is not an employee of the employer (such as an industrial hygienist or a safety engineer) is reasonably necessary to the conduct of an effective and thorough physical inspection of the workplace, such third party may accompany the Compliance Safety and Health Officer during the inspection.” (emphasis added)

If the ultimate outcome of the case, which seems likely, is a finding that OSHA does not have the authority to permit union representatives to participate in OSHA inspections of workplaces where they do not represent the workers, the effect would be to deny unions a potentially potent tool for organizing. As Judge Fitzwater described in his Memorandum and Order, unions such as the UAW in its ongoing organizing campaign at Nissan in Tennessee have come to rely upon participation in OSHA inspections as a valuable tool.

While it is too soon to say whether the Department of Labor will continue to defend the 2013 Letter and the position that OSHA has the right to permit union representatives to participate in safety and health inspections, Judge Fitzwater’s denial of the motion to dismiss raises serious doubt as to the long term viability of OSHA’s position.

In a two page Order issued yesterday, Senior District Court Judge Sam R. Cummings of the U.S. District Court for the Northern District of Texas ruled that the Department of Labor’s (“DOL”) controversial new Persuader Rule issued in March 2016, and its new Advice Exemption Interpretation, are “unlawful,” and Judge Cummings made permanent his earlier June 27th Preliminary Injunction Order.

The Rule and Interpretation, which now appear to be permanently struck down, would have imposed dramatic changes in longstanding precedents, by requiring public financial disclosure reports concerning payments that employers make in connection with “indirect persuader activities” that were not reportable under the long standing rules, but that would have, if the new rule had not been struck down, would have, for the first time, been considered reportable as persuader activity.

Judge Cummings Has Adopted The Preliminary Injunction And Made it Permanent

In a brief two page Order, Judge Cummings has adopted and incorporated the findings and conclusions in his earlier Preliminary Injunction, in which the Court concluded:

[The DOL is] hereby enjoined on a national basis from implementing any and all aspects of the United States Department of Labor’s Persuader Advice Exemption Rule (“Advice Exemption Interpretation”), as published in 81 Fed. Reg. 15,924, et seq., pending a final resolution of the merits of this case or until a further order of this Court, the United States Court of Appeals for the Firth Circuit or the United States Supreme Court.  The scope of this injunction is nationwide.

District Court Order Provides Employers Comprehensive Victory

The Court’s Order here gives employers a comprehensive victory, finding that the employers and organizations that brought the lawsuit had succeeded in establishing:

  • The DOL exceeded its authority in promulgating its new Advice Exemption Interpretation in the new Persuader Rule;
  • The new Advice Exemption Interpretation is arbitrary, capricious and an abuse of discretion;
  • The new Advice Exemption Interpretation violates free speech and association rights under the First Amendment;
  • The new Advice Exemption Interpretation is unconstitutionally vague; and
  • The new Advice Exemption Interpretation violates the Regulatory Flexibility Act.

This Injunction Appears Likely to Stand

While it is theoretically possible that the DOL could appeal from the issuance of the Permanent Injunction, given the election of Donald J. Trump and the Republican’s continued majority in both the Senate and the House, it appears unlikely that such an appeal will be pursued or that the new Congress would be supportive of the objectives of the now repudiated rule.

Employers Under the Microscope: Is Change on the Horizon?

When: Tuesday, October 18, 2016 8:00 a.m. – 4:00 p.m.

Where: New York Hilton Midtown, 1335 Avenue of the Americas, New York, NY 10019

Epstein Becker Green’s Annual Workforce Management Briefing will focus on the latest developments in labor and employment law, including:

  • Latest Developments from the NLRB
  • Attracting and Retaining a Diverse Workforce
  • ADA Website Compliance
  • Trade Secrets and Non-Competes
  • Managing and Administering Leave Policies
  • New Overtime Rules
  • Workplace Violence and Active-Shooter Situations
  • Recordings in the Workplace
  • Instilling Corporate Ethics

This year, we welcome Marc Freedman and Jim Plunkett from the U.S. Chamber of Commerce. Marc and Jim will speak at the first plenary session on the latest developments in Washington, D.C., that impact employers nationwide.

We are also excited to have Dr. David Weil, Administrator of the U.S. Department of Labor’s Wage and Hour Division, serve as the guest speaker at the second plenary session. David will discuss the areas on which the Wage and Hour Division is focusing, including the new overtime rules.

In addition to workshop sessions led by attorneys at Epstein Becker Green – including some contributors to this blog! – we are also looking forward to hearing from our keynote speaker, Former New York City Police Commissioner William J. Bratton.

View the full briefing agenda here.

Visit the briefing website for more information and to register, and contact Sylwia Faszczewska or Elizabeth Gannon with questions. Seating is limited.

Stop Sign CrosswalkToday, the United States District Court for the Northern District of Texas issued a nationwide preliminary injunction halting the Department of Labor’s (“DOL”) controversial new Persuader Rule and its new Advice Exemption Interpretation, previously discussed here and here.  The Rule and Interpretation marked a dramatic change by requiring public financial disclosure reports concerning payments that employers make in connection with “indirect persuader activities” that were not reportable under the long standing rules, but that would, if the new rule were to take effect, for the first time, be considered reportable as persuader activity.

Injunction Issues Just In Time

The injunction was issued in advance of the July 1, 2016, enforcement date, which the DOL had stated employers, and labor relations consultants, including attorneys, would need to start reporting engagements covered by the new Rule and Interpretation.  Employers and attorneys have raised concerns about the impact on the attorney-client privilege, including the chilling effect and interference with their ability to obtain/provide advice traditionally exempt from disclosure.

In granting the injunction, the Court concluded:

[The DOL is] hereby enjoined on a national basis  from implementing any and all aspects of the United States Department of Labor’s Persuader Advice Exemption Rule (“Advice Exemption Interpretation”), as published in 81 Fed. Reg. 15,924, et seq., pending a final resolution of the merits of this case or until a further order of this Court, the United States Court of Appeals for the Firth Circuit or the United States Supreme Court.  The scope of this injunction is nationwide.

District Court Order Provides Employers Comprehensive Victory

The Northern District of Texas went one step further than the United States District Court for the District of Minnesota, which last week ruled that the DOL’s Persuader Rule exceeded the agencies authority under the LMRDA, but stopped short of issuing an injunction.  The Court’s Order here gives employers a comprehensive victory, finding not only a substantial threat of irreparable harm but also that the Texas plaintiffs will likely succeed in establishing:

  • The DOL exceeded its authority in promulgating its new Advice Exemption Interpretation in the new Persuader Rule;
  • The new Advice Exemption Interpretation is arbitrary, capricious and an abuse of discretion;
  • The new Advice Exemption Interpretation violates free speech and association rights under the First Amendment;
  • The new Advice Exemption Interpretation is unconstitutionally vague; and
  • The new Advice Exemption Interpretation violates the Regulatory Flexibility Act.

Preliminary Injunction May Only Be Temporary Reprieve for Employers

Obviously a preliminary Injunction is just that, preliminary and temporary in nature.  It is anticipated that the DOL will file an appeal and, depending on the results of the Presidential Election later this year, this could be a looming threat for employers for some time.

Accordingly, employers should first do all they can, including signing long-term agreements with law firms and/or labor relations consultants before July 1, to be prepared in the event the Rule ultimately becomes effective, so as to potentially shield themselves from the obligation to report and disclose so-called indirect persuader activity that has been exempt from reporting under the former rules.