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Feel like the government shutdown has reduced news coming out of the federal administrative agencies? If so, January 17, 2019 likely provided a spark to your week. Last Thursday, National Labor Relations Board (“NLRB”) Chairman John Ring issued a letter which served as the most-recent move in the NLRB’s joint employer dance.

In his letter, Chairman Ring responded to the request of two U.S. House of Representatives Democrats that the NLRB withdraw its proposed joint employer rule. As we previously reported, in September 2018 the NLRB proposed to change the standard utilized to determine joint employer status. Under the new rule, an employer could be “found to be a joint employer of another employer’s employees only if it possesses and exercises substantial, direct and immediate control over the essential terms and conditions of employment and has done so in a manner not limited and routine.” If implemented, this rule would reverse the NLRB’s 2015 Browning-Ferris decision, which had overturned 30 years of NLRB precedent.

The House Democrats’ request stemmed from a recent D.C. Circuit Court of Appeals decision that found the NLRB’s 2015 Browning-Ferris decision proper. In Browning-Ferris, the NLRB ruled that it would consider a potential joint employer’s reserved right to control workers and any indirect control exercised. In its decision, the D.C. Circuit “affirm[ed] the [NLRB’s] articulation of the joint-employer test as including consideration of both an employer’s reserved right to control and its indirect control over employees.”

Given the D.C. Circuit’s decision, the House Democrats argued that the NLRB should withdraw its proposed joint employer rule and apply the Browning-Ferris standard.

However, in his January 17 letter, Chairman Ring resoundingly rejected the House Democrats’ arguments. In particular, Chairman Ring asserted that:

  • The joint employer standard the NLRB articulated in Browning-Ferris was neither clear nor affirmed by the D.C. Circuit;
  • “[T]he NLRB has long adhered to a consistent policy of deciding for itself whether to acquiesce to the views of any particular circuit court or whether to adhere to its own view until the United States Supreme Court rules otherwise[;]” and
  • The NLRB “is not compelled to adopt the court’s position as its own, in either Browning-Ferris itself or the final rule on joint-employer status.”

When the D.C. Circuit released its decision, some predicted that it would restrict the NLRB’s efforts to restore its prior joint employer test.  Chairman Ring’s letter should give employers some comfort that the NLRB may not feel so restrained.

Nonetheless, only time will tell how the NLRB’s joint employer dance concludes.  In light of the D.C. Circuit’s decision, the NLRB further extended the proposed rule’s notice and comment period (comments due by January 28 and responses to comments due February 11).  Therefore, it will be some time before the NLRB even releases its final rule.

The National Labor Relations Board (the “Board”) announced today that it will publish a notice of proposed rulemaking tomorrow in the Federal Register regarding its joint employer standard. The Board indicated that its proposed rulemaking would foster “predictability, consistency and stability in the determination of joint employer status.” The Board indicated that an employer could be “found to be a joint employer of another employer’s employees only if it possesses and exercises substantial, direct and immediate control over the essential terms and conditions of employment and has done so in a manner not limited and routine.” The proposed rule seeks to reverse a 2015 decision of the Labor Board in Browning- Ferris Industries, which had vastly expanded the scope of the joint employer definition and overturned decades of Board precedent in this area.

A comment period of 60 days will begin with the publication of the rule in the Federal Register. Chairman Ring and members Kaplan and Emanuel joined in proposing the new joint employer standard, while Board member Lauren McFerran dissented.

One of the strongest trends in human resource management is the dramatic increase in the use of mandatory employment arbitration agreements. In late 2017, a study by the Survey Research Institute at Cornell University determined that the number of private sector, non-union employees subject to mandatory arbitration agreements had dramatically increased in recent years. The study was conducted on a national level and secured responses from more than seven hundred employers. Between 1992 and the early 2000’s, the percentage of employees subject to mandatory arbitration agreements had risen from just over two percent to almost one quarter of the U.S. work force. The study concluded that as of the fall of 2017, the percentage of private sector, non-union employees subject to mandatory arbitration had more than doubled and now exceeded fifty-five percent. Thus, over sixty million American employees are now likely subject to mandatory employment arbitration agreements.

This dramatic growth preceded the landmark decision handed down in May, 2018 by the U.S. Supreme Court in Epic Systems Corp. v. Lewis. In this decision, the Supreme Court held that under the Federal Arbitration Act, an arbitration agreement that provides that an employee waives the right to bring a class action in court must be enforced. This decision is widely expected to increase even further the use of mandatory arbitration agreements by private sector employers. The decision put to rest a potential stumbling block to the enforcement of class action waivers in arbitration agreements that had been created by a decision of the National Labor Relations Board during the Obama administration and by the decisions of several federal Courts of Appeals. Thus, the Supreme Court has made the use of such agreements even more desirable by employers who now can generally be assured that their employees cannot bring class action arbitration or court cases against them. In other words, such agreements are now an even more effective means for employers to cope with the rapid increase in recent years in the numbers, costs and risks posed by employment-related lawsuits.

The advantages that the use of mandatory arbitration agreements offer private sector employers are several and are quite substantial:

  • Generally speaking, these agreements can be used to prohibit covered employees from bringing class actions against their employers
  • These agreements can require employees to waive their right to a jury trial; indeed, this has long been the principal advantage of the use of mandatory arbitration agreements
  • Instead, these agreements typically establish a procedure that permits employers and employees to select a decision maker from a panel of experienced former judges and/or licensed attorneys or other respected neutrals to hear and decide their cases, rather than juries
  • Because these procedures remove the risk of runaway jury awards and reduce the cost of litigation, employers are much more likely to be in a position of declining to agree to unreasonable settlement demands in cases that they believe involve meritless claims
  • Indeed, some studies indicate that employers are somewhat more likely to prevail in arbitration than in court proceedings
  • At the very least, and as alluded to above, the use of arbitration agreements will enable employers and employees to resolve their claims in a less costly manner than in courts; typically such agreements involve limited amounts of discovery and fewer procedural disputes
  • Claims are typically more quickly resolved in arbitration than in courts; faster resolutions benefit both employers and employees – they both avoid the years of discovery and delay that often characterize court proceedings
  • Conventional wisdom and some anecdotal evidence indicate that some plaintiffs’ attorneys are deterred from even pursuing employment-related claims once they become aware that doing so will involve arbitration rather than a potential jury trial
  • As opposed to court trials that are matters of public record and sometimes involve considerable publicity, arbitration procedures are private processes and are not as likely to result in the damage to goodwill, reputation and brand as may public trials
  • While arbitration agreements are indeed contracts, these contracts typically provide that the employees who sign them remain employees at will
The very real and apparent advantages to employers of the use of arbitration agreements is confirmed by the opposition to their use, especially since Epic Systems. Recent writings and publicity have often cast these agreements as vehicles designed to “destroy workers’ rights”. Arbitration agreements are strongly opposed by plaintiffs lawyers groups, civil rights organizations, and some politicians. Some plaintiffs law firms now espouse the filing of hundreds of individual arbitration demands on behalf of employees of an employer in order to pressure such employers to settle rather than having to absorb the costs of defending against large numbers of such claims. Opponents of arbitration agreements have recently argued that claims of sexual discrimination and sexual harassment should not be subject to arbitration. Significant political pressure not to utilize arbitration agreements has been applied against law firms, law schools and some private sector employers. The American Bar Association has adopted a resolution urging legal employers not to require mandatory arbitration of claims of sexual harassment. The State of New York has recently passed legislation that would prohibit private sector employers from requiring arbitration of sexual harassment claims. California will soon follow suit, and other states are considering similar legislation. Such state laws may well be found to be preempted by the Federal Arbitration Act and, thus, unenforceable.

Some courts will find arbitration agreements to be unenforceable if they are both “procedurally and substantively unconscionable”. But the bottom line is that well drafted and carefully implemented arbitration agreements will be enforced, and will provide employers with a much improved context in which to defend against claims. [1] Thus, the surge in the use of arbitration agreements documented by the 2017 Cornell study is likely to continue and indeed to expand rapidly.

[1] For example, well drafted agreements should place most if not all the costs of arbitration fees on employers; the obligation to settle disputes by arbitration should apply to employers as well as employees; the process for selecting an arbitrator must be fair; the waiver of the right to a jury trial must be clear and unambiguous; and so forth. The implementation of an arbitration agreement must be preceded by adequate notice, the ramifications of such agreements must be clearly summarized for employees in some appropriate fashion; the method utilized to secure employee consent to an agreement must be considered; and analysis must be accomplished as to what form of consideration is necessary to render such consent binding.

In a memorandum issued last week, NLRB General Counsel Peter Robb offered important guidance on how his office plans to prosecute claims of unlawful workplace rules in the wake of the Board’s restorative Boeing decision (365 NLRB No. 154 (Dec. 14, 2017)). As we discussed here last December, the Boeing decision created a sensible standard for determining the lawfulness of work rules. This was a welcome change for employers, given the flurry of handbook-related activity under the Obama-era Board. Unfortunately, though, Boeing gave little guidance on how to actually implement the new standard. Mr. Robb’s memo adds some clarity. Recall that Boeing established three different categories for evaluating employer work rules:  (1) rules that are generally lawful (known as “Category 1” rules); 2) rules that merit a case-by-case determination (“Category 2” rules); and (3) rules that are plainly unlawful (“Category 3” rules). Click here to read the full client alert.

On Monday, the NLRB unanimously vacated its December 2017 Hy-Brand Industrial Contractors decision, marking yet another abrupt reversal in the method for determining whether two employers can be held jointly liable for violations of labor and employment laws committed by either employer. In doing so, the Board effectively reinstated its 2015 Browning-Ferris Industries (“BFI”) decision, meaning that two businesses are joint employers when one has “indirect” or “reserved’ control over the other’s workers. Click here to read the full client alert.

Last week the National Labor Relations Board (“NLRB” or the “Board”) continued to correct its course to a more even balance between union and employer interests. It overturned four controversial decisions that had created a great deal of consternation and uncertainty in the employer community. Click here to read the full client alert.

 

Fresh off his Senate confirmation two weeks ago, new National Labor Relations Board (NLRB) General Counsel Peter Robb has issued guidance that may portend welcomed changes for employers regarding controversial Obama-era pro-labor decisions.

The guidance comes in the form of a memorandum to the Regional Offices, dated December 1, 2017, in which Mr. Robb introduces what is essentially the General Counsel’s office’s new enforcement agenda. This memo emphasizes the General Counsel’s efforts to address several pro-labor Board decisions that were issued in the past eight past years and that concern key issues for employers. Such issues include:

  • the expanded scope of protected concerted activity,
  • unlawful handbook rules,
  • use of the employer’s e-mail system for organizing purposes,
  • joint employer status,
  • conflicts between the NLRA and other statutes (such as Title VII).

To be sure, these decisions cannot be changed by the General Counsel or the Regional Offices alone—but only by contrary Board decisions. The  General Counsel’s promise to provide the Board with the Agency’s “best analysis” of these issues, however, may help facilitate changes down the road.

On a more immediate note, the memo also rescinds several prior General Counsel Memoranda interpreting various Board precedents in a pro-labor manner. These rescissions include prior General Counsel Memoranda concerning, among other things:

  • unlawful handbook rules (again),
  • inclusion of front pay in Board settlements,
  • pre-arbitral deferral guidelines, and
  • intermittent and partial strikes.

These rescissions are effective immediately. And while no replacement guidance has been issued yet, the rescissions likely signal the issuance of more employer-friendly guidance from the General Counsel in the future.

As the summary above suggests, any practical relief for employers  will likely come about only with new cases that give the Board and the General Counsel the opportunity to address these issues. This will take time. Meanwhile, the memo is quick to point out that, with regard to current and pending cases, the General Counsel will continue to apply existing Board precedent in making determinations as to whether to issue complaints. Obviously, it will be up to the new Board to make a determination as to whether that Board precedent will remain or should be overturned yet again. Nevertheless, this memo is perhaps the clearest indication yet that changes to the Obama Board’s pro-union labor policies are headed employers’ way, after all.

President Obama’s National Labor Relations Board (NLRB) faced intense criticism for issuing significantly more precedent-changing pro-labor rulings than any previous Board. During President Trump’s first 200 days, employers have been waiting for Board nominees to be confirmed to two open slots, giving Republicans a 3-2 majority and shifting NLRB decisions towards individual employee and management rights.

One of Trump’s nominees, Marvin Kaplan, a former Occupational Safety and Health Review Commission lawyer, was confirmed (50-48) to fill one of the two open Board seats on Wednesday, August 2. Kaplan will serve a five-year term expiring August 27, 2020. Trump’s second nominee, William Emanuel, a management-side employment attorney, has been approved by the Senate Committee on Health, Education, Labor, and Pensions. A full Senate vote has not yet been scheduled, but is expected after the August recess. If he is confirmed, the Board will have a Republican majority for the first time since 2007.

The General Counsel position, currently held by Democrat Richard Griffin, Jr., will become vacant in November 2017. The Administration is considering Peter Robb, a management-side labor attorney, as a potential General Counsel nominee. The General Counsel controls which cases the NLRB prioritizes and pursues.  Consequently, whomever Trump chooses will have the opportunity to begin the process of reversing many of the pro-labor rulings issued by the Obama Board.

Finally, Phillip Miscimarra, Chairman of the NLRB and the only Republican remaining from Obama’s Board, announced on August 8 that he would no longer serve on the Board when his term expires in December 2017. Miscimarra made this decision in order to spend more time with his family. Miscimarra dissented from nearly every major precedent change from 2013 to the present. The Administration will need to make a prompt nomination of a qualified Republican to Miscimarra’s seat to avoid 2-2 deadlocked decisions of the full Board (if Emanuel is confirmed) or having cases decided by three member panels with 2-1 Democrat majorities. The Senate already has a full legislative schedule through the remainder of 2017, so confirming a Board nominee before Chairman Miscimarra leaves his seat will be more difficult the longer the President takes to make his selection.

Recently, House Republicans renewed efforts to rein in expansion of two federal labor laws’ joint employer definition by introducing the Save Local Business Act (“SLRA”) (H.R. 3441). The SLRA limits how affiliated companies are considered joint employers for collective bargaining liability purposes and within wage and hour laws.

The SLRA represents an expanded effort to reverse the National Labor Relations Board’s (“NLRB”) Browning-Ferris Industries of California Inc., 362 NLRB No. 186 (Aug. 27, 2015) decision. In Browning-Ferris, the NLRB reversed a 30-year old standard for determining joint employer status under the National Labor Relations Act (“NLRA”). According to Browning-Ferris, affiliated companies are joint employers if they 1) “are both employers within the meaning of the common law” and 2) “share or co-determine” matters governing the essential terms and conditions of employment. Under the first prong, the NLRB focuses on a company’s “right to control” employees and does not consider whether the company exercises that right. For example, a company may create a common law employer relationship if it reserves ultimate discharge authority over temporary workers but does not exercise that right. For the second prong, the NLRB defines “essential terms and conditions” to include wages, hours, hiring, firing, and supervision. Evidence of controlling these “essential terms and conditions” may include dictating the number of contingent workers supplied and controlling schedules or overtime.

The SLRA also addresses recent expansion of the joint employer definition by courts under the Fair Labor Standards Act (“FLSA”). For example, in Salinas v. Commercial Interiors, Inc., 848 F.3d 125 (4th Cir. 2017), the federal Fourth Circuit Court of Appeals, covering Maryland, North Carolina, South Carolina, West Virginia, and Virginia, applied an expanded test to conclude that general and subcontractors were joint employers. Under the Salinas-applied test, joint employment exists when 1) two companies “share, agree to allocate responsibility for, or otherwise codetermine – formally or informally, directly or indirectly – the essential terms and conditions of a worker’s employment” and 2) the companies’ combined influence “over the terms and conditions of the worker’s employment” renders the person an employee instead of an independent contractor. This determination has significant implications because, as joint employers, both companies must comply with the FLSA as it relates to an individual’s entire employment for a workweek. In other words, a company must add the hours worked for both employers to determine whether and to what extent the individual earned overtime pay.

The SLRA rolls back these expanded definitions by redefining joint employer in both the NLRA and FLSA.  Specifically, under the Act:

A person may be considered a joint employer in relation to an employee only if such person directly, actually, and immediately, and not in a limited and routine manner, exercises significant control over the essential terms and conditions of employment (including hiring employees, discharging employees, determining individual employee rates of pay and benefits, day-to-day supervision of employees, assigning individual work schedules, positions, and tasks, and administering employee discipline).

Ultimately, the bill seeks to reinstate the traditional joint employer standard and restore some semblance of predictability that the NLRB eviscerated in the Browning-Ferris decision. Although the House is on recess, the bill will almost assuredly proceed within Education and Workforce Committee upon Congress’s September return. In addition, the bill could quickly move to the House floor for consideration and, with sufficient support, advance to the Senate. Frantz Ward will keep close track of the bill and provide updates on the SLRA’s progress.

BN-KB504_edp082_GR_20150828194637Last week, the U.S. Department of Justice (DOJ) made a significant reversal in its position regarding the critical class action waiver cases pending before the Supreme Court. In January, the Supreme Court granted certiorari in three consolidated cases: NLRB v. Murphy Oil USA, Inc.; Epic Systems Corp. v. Lewis; and Ernst & Young LLP v. Morris. The cases address whether employer arbitration agreements prohibiting employees from bringing or participating in class action litigation violate the National Labor Relations Act (NLRA). The Supreme Court’s decision will resolve the current circuit split on the issue.

The National Labor Relations Board (NLRB) in D.R. Horton, Inc., 357 NLRB No. 184 (2012), held that class action waivers violate the NLRA and has consistently adhered to this position, despite setbacks in some Circuits. The Sixth, Seventh, and Ninth Circuits agree with the NLRB’s position, while the Second, Fifth, and Eighth Circuits have upheld the waivers.

Under the Obama Administration, the DOJ filed a petition for a writ of certiorari on behalf of the NLRB defending the Board’s position that class action waivers are unenforceable. After the change in administration, the DOJ stated it has “reconsidered the issue and has reached the opposite conclusion.”

The DOJ’s changed stance combined with the appointment of Justice Gorsuch makes it more likely that the Supreme Court will uphold class action waivers. However, no one will know for sure until a decision is announced in late 2017 or early 2018.

The full amicus brief is available here.