By Nelson Cary and Lauren Sanders
Yesterday, the NLRB overruled the Obama-era Browning-Ferris Industries decision and returned to an older, more demanding test for determining when multiple employers are joint employers.
First, a little history. For a long time, employers could only be considered “joint employers” if they each exercised direct and immediate control over employees. Joint employers can be liable for unfair labor practices and could be obligated to negotiate collective bargaining agreements together — even when they do not directly hire and pay the employees. In 2015, the NLRB decided in Browning-Ferris Industries that employers could be joint employers if there was evidence that a company has indirect or even potential control over workers technically employed by another company.
In Hy-Brand Industry Contractors, Ltd., decided Thursday, the Republican-majority NLRB decided that Browning-Ferris Industries decision was “vague and ill-defined” and had “fundamentally altered” the NLRA. The NLRB then returned to the prior joint employer test, which requires a showing that the employers exercise direct and immediate control over the employees.
Interestingly, however, despite returning to a more employer-friendly standard, the NLRB majority still found that the two employers in question were joint employers. Specifically, both employers exercised joint control over the essential employment terms, the control was direct and immediate, and it was not limited and routine. For example, employees at both companies participated in the same 401(k) and health benefit plans, and they attended common mandatory training sessions and an annual corporate meeting. The companies also shared supervisors and employment policies, which included the same equal employment opportunity policy, workplace harassment policy, FMLA policy, and drug-free workplace policy.
The dissenters included Members Pearce (D) and McFerran (D). The dissenters argued that the decision to return to the prior joint employer test was flawed for a number of reasons, including that it violates the explicit policy of the NLRA to “encourage[e] the practice and procedure of collective bargaining.”
For the labor professional, this decision is important for a number of reasons:
- First, it may be an indicator of things to come. We are likely on the threshold of an era in which there is a good possibility that a number of decisions reached in the last eight years will be overturned.
- Second, it is helpful for employers that are engaged in industries where joint employment risks exist. For example, franchisees and franchisors can likely breathe a sigh of relief with this new holding.
- Third, it limits not only exposure to unfair labor practice liability and collective bargaining obligations, but also exposure to economic actions by unions against employers not directly involved in a labor dispute.
- Finally, it is a good reminder of the significance of the Trump Administration filling the seat that Chairman Miscimarra’s (R) departure will create. As readers of this blog know, Chairman Miscimarra is leaving the NLRB this month. The NLRB decided Hy-Brand in a 3-2 vote, with all Republican members voting in favor and all Democratic members voting against. Returning to a 2-2 division will slow the pace of decisions like this one.