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Affluent Investor | June 24, 2017

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NLRB’s Browning-Ferris Decision — Yet Another Administrative Law Abuse

National Labor Relations Board sign in Washington D.C.  (Photo by Geraldshields11) (CC BY) (Resized/Cropped)

National Labor Relations Board sign in Washington D.C.
(Photo by Geraldshields11) (CC BY) (Resized/Cropped)

One of the clearest lessons of the Obama administration is that administrative law can and will be used as a partisan weapon. Of course, that has been done before, but under Obama it has become shockingly common. There is no better example than the way the National Labor Relations Board has tried to reward the president’s allies and hurt his opponents.

Barack Obama was so eager to load up the agency that interprets and enforces federal labor law that he was unanimously slapped down by the Supreme Court in NLRB v. Noel Canning when he tried to redefine what “recess appointment” means to rush his three chosen people onto the Board.

Eventually, Obama got his pro-union picks confirmed and they have been busy doing all they can to assist what’s left of Big Labor in the private sector. Their latest and most egregious decision is Browning-Ferris Industries, which entails a blatant rewriting of the law so as to give unions new leverage and opportunities for “organizing” workers. The majority found its opening for this legal expansion in the meaning of “employer” under the National Labor Relations Act (NLRA).

Browning-Ferris (BF) contracted with Leadpoint Business Services to provide workers for a variety of tasks involving sorting recycled materials. When Teamsters Local 350 sought to unionize around 120 Leadpoint workers at the BF facility, it sought a ruling from the NLRB as to whether both companies could be considered as employers of those workers, and thus required to bargain with it if the union were to be certified as their representative.

The NLRB’s regional director decided that under the legal precedents, only Leadpoint was the employer. For decades, the law has been that for a company to be the “employer” it has to exercise “direct and immediate control” over the workers. While BF could exercise some influence over the Leadpoint workers (such as insisting that they could be terminated at its discretion), the regional director did not think that this amounted to a “joint-employer” situation.

The 3-2 Obama majority on the full NLRB decided, however, that it was time to toss out the old precedents that had allowed lots of flexible contracting arrangements in the labor market. Under the Board’s vague new approach, two firms can be treated as joint employers whenever one of them has some latent authority over the terms and conditions under which the workers directly employed by the other labor. The majority praised its handiwork as superior to the old standard and noted ominously that it will “modify the legal landscape.”

To say the least. Iain Murray of Competitive Enterprise Institute correctly writes that this decision “turns the clock back 30 years on American employment practices, which have seen massive growth in flexible, more autonomous business and employment arrangements such as franchises, contract work, suppliers, and so on.”

So, why is this a victory for the unions? Because they frequently find it easier to pressure large firms into caving in and unionizing than small ones. Large companies are more likely to succumb to “corporate campaigns” (a polite term for vilification) and agree not to oppose the unions as they try to show that they have majority support through “card checks.” (That was the case at the Chattanooga Volkswagen plant, where management cooperated with the UAW; only a petition drive for a secret ballot election kept the union out, as I explained in this article.)

James Sherk of the Heritage Foundation contends that the BF ruling was intended to destroy the franchise business model, and will have that effect. “The most likely result,” he writes, “is that corporate brands will simply stop franchising and run all stores directly themselves.” Just what Big Labor wanted but couldn’t possibly get through legislation.

Putting aside the impact of the decision, is it a good application of the law? The NLRB is supposed to decide cases in accordance with the National Labor Relations Act. Does Browning-Ferris show sound legal reasoning? Hardly.

The majority makes a risible effort at justifying its ruling by saying that it is using a common law concept of employment. But the whole point of the NLRA was to supplant the neutral rules of the common law with regard to employment and agency with a regulatory framework designed to help unions and promote collective bargaining. Reaching into common law to support a ruling that goes against decades-old precedents grounded in the NLRA is highly incongruous.

Moreover, the majority tries to justify its decision by appealing to the Supreme Court’s 1944 decision in NLRB v. Hearst, which involved the status of newsboys who delivered papers. The Court ruled that even though the contract between the parties expressly said that the newsboys were independent contractors, the “underlying economic facts” showed that the newsboys were actually employees.

In his commentary on BF, law professor Richard Epstein tears that reliance apart, writing, “But that majority conspicuously neglects to mention that Hearst was in fact repudiated in the Taft-Hartley Act of 1947, which excluded (most imperfectly), ‘any individual having the status of an independent contractor,’ without giving a workable definition of who those individuals are.”

Furthermore, Epstein observes that in Hearst, “no third party was involved, and hence no issue of whether two or more firms should be treated as joint employers of any worker.” It makes you suspect that the NLRB majority would all have flunked Professor Epstein’s labor law course.

Ah, but when good legal reasoning collides with a political objective, Obama administration regulators have no trouble deciding which wins: it’s invariably the political objective.

The Board’s BF decision provides further support for the argument Professor Philip Hamburger makes against administrative law. I have previously written about his magisterial book Is Administrative Law Unlawful? In a nutshell, Hamburger maintains that administrative law – that is, rulings with the force of law made by unelected bureaucrats such as those on the NLRB – is incompatible with our constitutional precepts.

The Framers wanted to separate the legislative, executive, and judicial functions to keep the U.S. from sliding back into “prerogative rule” which the British and their American colonists had found so onerous. Administrative agencies like the NLRB inappropriately combine all three powers.

If federal law regarding “joint employers” needs to be changed, Congress should do so. The NLRB should no more rewrite statutes, which is what BF amounts to, than the courts should rewrite them. It will be a fine day for America if we can get back to the Constitution’s intended separation of powers.

Until that time, we must rely on Congress and the judiciary to rein in zealous bureaucrats who have their own agendas for transforming the country. I’ll give Professor Epstein the last word: “The quicker this unfortunate decision is scrubbed from the law books, the better.”

 

Originally posted on Forbes.com.

 

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