Court Throws Wrench into Trump Franchise Fix

BY: Bill McMorris Follow
@FBillMcMorris

January 3, 2019 9:40 am

A federal court ruling could further complicate the White House’s attempt to roll back one of the Obama administration’s most controversial labor policies.

The D.C. Circuit Court of Appeals affirmed President Obama’s National Labor Relations Board’s ruling in Browning-Ferris, which holds parent companies liable for workplace violations committed by subcontractors or franchise businesses. The 2-1 decision came as President Trump’s appointees to the NLRB, the agency that oversees union elections and labor disputes, deliberate on a new rule that would restore the previous precedent requiring parent companies to be directly responsible for labor violations in order to be held accountable. The majority, both of whom were appointed by Obama, acknowledged that the Court “cannot tell from this record what facts proved dispositive in the Board’s determination that Browning-Ferris is a joint employer,” but said the Board acted within its right to make that decision.

“We affirm the Board’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’ terms and conditions of employment,” the Dec. 28 ruling said. “We conclude that the Board’s right-to-control standard is an established aspect of the common law of agency.”

Judge A. Raymond Randolph, a George H.W. Bush appointee, issued a blistering dissent to the ruling. He said the ruling misinterpreted labor law and the longstanding precedent that the Obama board overturned, noting that the decision would add “to the uncertainty the Board’s Browning-Ferris decision has generated” for business owners. He also noted that the Court should have deferred to the agency, which is in the midst of considering a new rule that could re-establish the previous precedent.

“I dissent because the majority should not have issued any merits opinion in light of the pending rulemaking proceedings,” Randolph said. “The majority opinion—without any reasonable explanation—threatens to short-circuit the Board’s choice, to control and confine the scope of its rulemaking, and to influence the outcome of that proceeding … our court should not be attempting to preempt the Board’s forthcoming judgment in the rulemaking proceeding.”

A veteran labor attorney, who requested anonymity because he has cases pending before both the NLRB and the D.C. Circuit, said that the decision was improper given the forthcoming rule from President Trump’s appointees. He further accused the NLRB of undermining the administration by asking for a ruling in the case, rather than pushing for a deferral until the agency had completed the rulemaking process.

“Appointees to the D.C. Circuit and the career bureaucrats in the agency who wanted to push this forward, rather than the congressionally confirmed NLRB, have come together now to throw a monkey wrench in the whole thing,” the attorney said.

The NLRB did not respond to request for comment about the decision.

The agency has already encountered delays in settling the joint employer question. In December 2017 the Republican-controlled board reversed the Obama decision in Browning-Ferris. That decision was scrapped after a controversial report from an agency inspector said Trump-appointed board member William Emanuel should have recused himself because his former law firm had represented companies in joint employer-related cases. The veteran labor attorney said the D.C. Circuit had created a recipe for “litigation chaos” by intervening weeks before the agency was set to establish an official standard on joint employer.

“It’s a prescription for litigation chaos instead of letting the agency issue a decision once and for all,” the attorney said. “They pre-empted the NLRB so that whatever it does it will find itself subject to attack.”

Matthew Haller, a spokesman for the International Franchise Association, said the ruling will only create more uncertainty for small business owners and parent companies.

“If the second highest court in the land can’t interpret how the Obama NLRB intended for their convoluted joint employer standard to be applied, how is a small business owner supposed to figure it out?” Haller said in a statement. “This underscores the need for rulemaking or a legislative solution to clear up the uncertainty facing America’s 730,000 franchise small business owners and their employees.”

The NLRB is still in the midst of collecting public comments about the new rule before it begins its final deliberations on Jan. 14.