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Employers Beware– EEOC Files Amicus Brief in Support of NLRB’s New Joint Employer Standard

Connecticut Law Tribune

October 20, 2016

The Equal Employment Opportunity Commission (“EEOC”) recently filed an amicus brief supporting the National Labor Relations Board’s (“NLRB”) new, loosened joint employer standard in Browning-Ferris Industries’ appeal of last year’s momentous NLRB decision.  This is a worrisome development for employers as it suggests the government is working in concert to propagate this pro-labor standard.  If the government ultimately succeeds, employers with previously limited exposure may find themselves liable for all kinds of labor and employment law violations committed by their joint employing partners.

We have written previously about the NLRB’s new joint employer standard issued in Browning-Ferris Industries of California, Inc. d/b/a BFI Newby Island Recyclery, et. al. (“BFI”) in 2015.  The new standard is, in fact, a return to the joint employer standard which the NLRB used until the mid-1980s.  Under the pre-BFI standard, two entities were joint employers if they shared or codetermined matters governing the essential terms and conditions of employment and actually exercised this power.  In other words, where one entity had direct and immediate control over various aspects of employment over the other entity’s employees (including such things as supervision, scheduling, hiring, firing, or directing those employees), these entities would be joint employers.

The standard which the Board adopted in the 2015 BFI case is much broader.  The Board now considers 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.  Thus, if an employer has the ability to exercise control, even where it did not use that authority, it can be found to be a joint employer.

Browning-Ferris Industries is currently appealing the NLRB’s decision to the United States Court of Appeals for the District of Columbia Circuit. This case has already proven controversial and hotly contested – multiple amicus briefs have already been filed.  One of these was the EEOC’s brief in support of the new rule.  In advocating for the new rule, the EEOC pointed out that the NLRB’s new rule is actually identical to the EEOC’s own joint employer rule.

In seeking to convince the DC Circuit to uphold the NLRB’s new standard, the EEOC argued it is the same standard which the EEOC already uses. The EEOC declared it considers its interests in complete alignment with the NLRB.  In fact, the EEOC views itself as analogous to the NLRB because of similarities between the laws for which the two agencies are responsible.  The EEOC argued its standard is relevant “because Title VII is based upon the NLRA, the statutes’ definitions of ‘employer’ are virtually identical, and both Title VII and the NLRA are remedial in nature.”  It also said Title VII and the NLRA “are often interpreted in tandem.”  It makes sense the EEOC would want a loose joint employer standard considering it prosecutes employment discrimination and related cases.  Given these types of cases can sometimes result in six or seven figure liability (if not more), the EEOC wants to ensure it has the continued power to go after the “deep pocket” should it consider it necessary to do so.

The EEOC argued for the NLRB’s new test by defending its own existing standard, which it claimed was “consistent with the NLRB’s newly articulated standard.” It recited its “long defined” joint employer definition as, “two or more employers that are unrelated or that are not sufficiently related to qualify as an integrated enterprise, but that each exercise sufficient control of an individual to qualify as his/her employer.”  The EEOC described its standard as, “[L]ook[ing] at an entity’s right to control the terms and conditions of employment, as well as its indirect control of the terms and conditions of employment.”

The EEOC argued its test “successfully identifies the entities with meaningful control over the terms and conditions of employment” because it allows agencies to liberally construe who is considered an employer. It also argued its test “appropriately looks at the totality of the circumstances” to determine whether one or both businesses exercise sufficient control over workers.  The EEOC’s test draws factors from common law principles of agency to determine whether there is “sufficient control.”  Among other factors, these include where the work is performed and which business furnishes equipment, hires and fires workers, controls their daily activities, pays them, and provides benefits.

In explaining this “totality of the circumstances” approach, the EEOC explained, “No one factor is determinative and not all factors apply in any given case.” In other words, none of these factors are, by themselves, decisive, and it is not necessary to satisfy a majority of the factors.  Rather, the EEOC emphasized that its test is “intentionally flexible” and cited joint employer case precedent in which courts based their decisions on entirely different factors.  For example, in one case a District Court denied summary judgment to a putative joint employer because of the EEOC’s argument the putative joint employer had authority to insist on a no-facial-jewelry policy.

Of course, while the EEOC touts this flexibility as a benefit, this flexibility also makes it far more difficult for companies to evaluate their risks and “to understand the contours of compliance,” as Browning-Ferris argued in its initial appellate brief. It is very difficult to set appropriate policies when virtually anything can be used to justify a joint employer finding.  In fact, Browning-Ferris went so far as to argue the new standard is arbitrary and capricious “because it is so vague and unworkable that it deprives employers of their right to due process.”  However, while admitting its “flexible joint-employer test, like the NLRB’s, carries more uncertainty than the NLRB’s now-discarded rule,” the EEOC rejected these concerns.

The EEOC also defended the “right to control” and “indirect control” factors of the NLRB’s test. Interestingly, however, while it cited to multiple cases finding joint employer status on the basis of an entity’s right to control or indirect control of the terms and conditions of employment, most were EEOC administrative decisions and not judicial opinions.  In fact, the EEOC cited just one federal court opinion finding “right to control” a factor to be considered in joint employer analyses (an 11th Circuit decision from 1994) and none with respect to “indirect control.”  That the EEOC could find no more support than one twenty-two year old case implies these standards are not as ubiquitously accepted by the federal courts as the EEOC suggests.

So what does all this mean for employers? The government’s aggressive stance in fighting to expand the joint employer standard should be of concern.  It suggests the government considers some employers as currently being inappropriately shielded from liability for labor and employment law violations.  Should the government ultimately prevail, we believe it will widen its net and attempt to paint more and more companies as joint employers.  Certain industries where the government believes significant abuses are occurring may face particular scrutiny.  For example, Browning-Ferris involves a staffing company and the government may be intending to crackdown on the entire staffing industry.

For now, it remains to be seen whether the District of Columbia Circuit will side with the NLRB and the EEOC. Of course, regardless of the District of Columbia Circuit’s decision, the case may well wind up in front of the United States Supreme Court.  While final resolution may be a long way off, employers should seek counsel now to review their practices and determine whether they could be considered a joint employer should the new standard prevail.  We will continue to monitor this case and keep you apprised of any further updates.