United States: The Practical NLRB Advisor

The proposed rule changes

The joint-employer NPRM is the more far-reaching and complex of the two and requires a brief recap of its significance and history. Under the joint-employer theory, the statutory employees of one employer (Employer B) may also be deemed the statutory employees of another employer (Employer A) where Employer A exercises the requisite degree of control over the wages, hours, and working conditions of Employer B's employees. This issue is potentially applicable to a myriad of business-to-business arrangements including, but not limited to, the franchisee/ franchisor, contractor/subcontractor, and user/employee leasing or temporary company relationships. Indeed, if the criteria are "loose" enough, it could be applicable to any employers in functional privity to one another.

The question of whether two entities are joint employers turns on the type and degree of control held by one entity over the employees of another. Until recently, this was a matter of long-settled Board law. For decades, the Board had held that to be deemed joint employers the two entities had to codetermine the essential terms and conditions of employment for the employees in question. The Obama Board, however, overturned this precedent and spawned an enormous amount of policy uncertainty and disarray when it issued its 2015 decision in BrowningFerris Industries (BFI). (See the Practical NLRB Advisor, Issue 1). In BFI, the Board held that even evidence of indirect or merely potential or unexercised control over the wages, hours, and working conditions of the employees in question could be sufficient to demonstrate joint-employer status. This extraordinarily broad, frustratingly vague, and seemingly limitless test encompasses not only such standard business-to-business arrangements as franchises, subcontracting, and temporary and leased help, it arguably applies to any two employers that are operationally proximate to one another.

Given the political and policy turmoil that followed the BFI decision, the succeeding Trump Board sought to return the joint-employer analysis to its traditional framework and to do so on a more permanent basis. Thus, rather than merely issuing a decision in a new case that overruled BFI, the Trump Board decided to utilize the agency's rarely exercised rulemaking authority. (See the Practical NLRB Advisor, Issue 12). Despite being more time-consuming, the choice of rulemaking over adjudication was clearly aimed at bringing about greater stability and permanence with respect to this now controversial theory. Rulemaking, it was hoped, would result in a permanent solution as opposed to the partisan flipflopping that seems to occur every time the Board's political majority changes. 

That hope was, however, dashed with the issuance of the Biden Board's joint-employer NPRM, which in essence proposes to completely overturn the Trump Board's formulation and return to the analysis under BFI. It is now clear that the Biden Board, at any rate, views rulemaking no differently than adjudication in terms of the permanence or stability of its result. Either is susceptible to summary reversal by a subsequent Board of a different political persuasion.

Were this not obvious enough, the current Board doubled down on this approach just weeks later by proposing to rescind the so-called "election protection rule" adopted by the Trump Board. Substantively, this rule made modest changes to the Board's "blocking charge" policy, provided employees who are subject to their employers' voluntary recognition of a union the brief opportunity to voice their own choices on the issue, and modified the criteria necessary to "convert" a construction industry pre-hire agreement into a full-fledged union relationship. The Trump Board made the last change in response to repeated criticisms of its then-extant policy in reviewing federal court' opinions. Undaunted by any of this, and again seemingly unconcerned with maintaining policy stability, the current Board has now proposed jettisoning the rule in its entirety and returning to the pre-rule practices.

Stakeholder revolt?

Much like the stock market, the one thing federal agency stakeholders hate most is uncertainty. Most are perfectly willing to play by the rules, but rightly complain when the rules are changed in the middle of the game. This is happening with alarming frequency at the NLRB, where legal principles apparently only have a shelf life that is commensurate with the ascendancy of one political party or the other. This has become especially disturbing now that it impacts both the rulemaking process and the decisional process since the entire rationale behind rulemaking is the establishment of more durable policies. 

The seemingly constant cycle of reversals and the purported "discovery" of new theories is remarkable given that the NLRA is a relatively simple statute that has been in existence for nearly ninety years. One would think that most of the essential issues under the statute should have been definitively resolved decades ago. That, however, is decidedly not the case. Each successive Board majority and general counsel now repeatedly revisits settled principles, attempts to resuscitate long dead theories, overrules their predecessors, and confounds their stakeholders.

Those stakeholders are growing progressively more frustrated with this lack of stability. They no sooner adjust their practices or revamp their policies to bring themselves into compliance with the NLRA, only to find that the goalposts have been moved. This not only confuses stakeholders, it makes compliance more difficult and harms any perception of the NLRB as a neutral arbiter. Far too often the inevitable by-product of these perceptions is an increasing level of noncompliance.

The federal judiciary

The NLRB is but one cog in the massive "administrative state"—the alphabet soup of federal agencies, subagencies, departments, and bureaus that largely make and enforce the laws that most affect our daily lives. For nearly 100 years now, the administrative state has grown enormously and relentlessly to the point that while nominally part of the executive branch, it has in fact become its own "fourth branch" of government.

This development is alarming in many respects, but none more so than the fact that it is fundamentally antithetical to our most basic constitutional principles. Under the U.S. form of government, "law making" authority resides strictly with the U.S. Congress under Article II of the U.S. Constitution. Laws are only to be made by elected (and therefore accountable) officials and not by unelected (and therefore unaccountable and often anonymous) federal bureaucrats. Despite this basic constitutional tenet the quasi-legislative power of the administrative state continues to be exercised with ever-increasing frequency and breadth. The causes for this phenomenon are many, ranging from the complexities of the regulated space, the political reluctance of Congress to legislate, and to the old maxim that power itself begets more power. To whatever one may attribute the cause, no one denies the reality.

The growth of the administrative state has not escaped the notice of the federal judiciary where there appears to be increasing concern over its extra-constitutional nature. The concern was on full display in the Supreme Court of the United States' decision last term in West Virginia v. Environmental Protection Agency, when the Court invalidated a novel U.S. Environmental Protection Agency (EPA) rule based on vague statutory language where the rule would have had enormous economic consequence. The EPA case was framed in terms of the so-called "major questions doctrine," holding that vague and nonexplicit statutory power cannot support agency rulemaking that has significant economic consequence.

Judicial skepticism over the exercise of lawmaking authority by regulatory bodies has manifested itself in other legal theories in addition to the major questions doctrine, ranging from the "non-delegation doctrine," which holds that there are certain powers that Congress cannot constitutionally delegate to the executive branch, to the question of judicial "deference" to agency actions. These and other analytical frameworks, as well as a more stringent application of the Administrative Procedure Act and its requirements that administrative rules have a reasoned and supported basis and are not arbitrary or capricious, all evince a judicial concern over the administrative state's repeated forays into legislating by regulation.

Board rulemaking

The two referenced Biden Board rulemaking proposals may not prompt eventual court analysis under the "major questions"

or "non-delegation" doctrines, but they do run headlong into a judicial zeitgeist that has placed new emphasis on those doctrines out of concern for the legislative drift of the administrative state. Perhaps more significantly, the two proposals plainly raise questions regarding agency deference and arbitrariness. Both proposals share a similar set of problems in this regard as neither plows new ground. Rather, each one merely seeks to reverse rulemaking properly completed by a prior Board only a short while ago. Neither contains a cogently presented rationale for taking a 180-degree turn from the existing rules, nor does either cite persuasive evidence of problems under the current rules that would justify their wholesale reversal. As already noted, the only clear empirical evidence is that the Board's political majority has shifted.

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