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NLRB Joint Employer Rewrite Signals Expansion of Partisan Battle

Dec. 14, 2021, 10:45 AM

Plans from the Democratic majority on the National Labor Relations Board to repeal a Trump-era rule on joint employment could be the opening salvo in a more expansive partisan war—one where labor and management-side interests battle each other through new rulemaking and subsequent lawsuits in federal court.

The shift threatens to stretch the small agency’s resources and give courts an opportunity to further intervene, employment lawyers say. In the short-term, it heightens the partisan rancor at the NLRB and the legal tug of war that follows.

“We’re going to be in a stalemate in the system in the courts, as we’ve been in the legislative process,” said Roger King, a senior attorney for the HR Policy Association, which lobbies for employers. He predicted that management groups would “for sure” challenge the Democratic policy in federal court, regardless of what it says.

For the better part of a century, the federal labor board has flip-flopped its interpretations of the law based on who’s in the White House. Republican and Democratic majorities each hand down decisions—on everything from who is an employer to what type of worker conduct is protected—only to see them reversed when their opponents take over a few years later. When Party A regains power, a new crop of appointees reinstates the repealed policies, repeating the cycle.

The board on Friday announced in the federal regulatory agenda that it would rework a 2020 rule governing joint employment, the legal threshold for when one company is jointly liable for workers directly employed by another. Under the National Labor Relations Act, it governs whether subcontractors and workers for large franchise chains can form a union and collectively bargain with the parent employer. The rule, written by the Republican majority, set a standard that largely defined the employer as the business directly controlling the workers, protecting large franchise companies from liability.

Democrats, now with a 3-2 majority, are expected to reinstate a stricter Obama-era standard that would allow unions to organize large swaths of workers at fast food chains and other franchises. Their announcement came the same day the D.C. Circuit held oral arguments over a 2018 settlement with McDonald’s Corp. over its potential liability as a joint employer over alleged unfair labor practices. The case began with a 2014 complaint under an Obama-appointed general counsel and was settled in the company’s favor during the Trump administration, demonstrating how the partisan whipsaw can affect major enforcement cases.

Board Makeup

It all has to do with the NLRB’s structure. The five-member panel can either set policies through court-like decisions in individual cases, or through formal administrative rulemaking on a subject matter. The board generally has favored case law because it required less time and fewer resources. But in recent years, the Trump-appointed majority began to write more rules, seen as more precise and harder to repeal than simple decisions.

To change the joint employer standard, the current Democratic majority on the NLRB must write a rule that would, at the very least, repeal the 2020 regulation. It could then adopt a standard through either a decision or a replacement rule. The latter option may be more attractive, legal scholars say, because the notice and comment requirement would make it harder for a future GOP board to repeal.

“You have to go through all these hoops, so it takes a while to do that,” said Anne Lofaso, a former board attorney and labor law professor at West Virginia University. “So they can’t just immediately overturn it, and if you have a case by adjudication they can do that.”

A rule also could be tailored to withstand the scrutiny of federal courts, particularly the 2018 D.C. Circuit decision in Browning-Ferris Industries, which upheld the Obama board’s original decision on joint employment but also limited deference to the board who is an employer, Lofaso said.

Management attorneys are steeling themselves for a fight, but in the meantime will keep navigating the political back-and-forth.

“They want the broadest possible ruling they can sustain, and that’s how they’ll draft it, but I think they’re going to have some problems in the courts if they go too far,” said former Rep. Bradley Byrne, a management-side attorney who served on the House labor committee before retiring in 2021. “This is a definition that everyone has to live with.”

To contact the reporter on this story: Ian Kullgren in Washington at ikullgren@bloombergindustry.com

To contact the editor responsible for this story: Martha Mueller Neff at mmuellerneff@bloomberglaw.com