NLRB Changes Course On Joint Employer Standard

Volume 16, Issue 23
December 21, 2017

Just a few months after the addition of President Trump's appointees, William J. Emanuel and Marvin E. Kaplan, the National Labor Relations Board (NLRB or Board) has overruled several key cases that plagued employers during recent years.  While the changes in Board law have been fast and furious these last few days, we will focus here on the joint employer standard.

You may remember that in 2015 the NLRB completely overhauled the standard for determining when two or more separate companies are a "joint employer" of employees for purposes of collective bargaining under the National Labor Relations Act (NLRA).  The new broad standard adopted in Browning-Ferris Industries of California, Inc., (2015), was one of the most sweeping and significant changes to NLRA law made by the then Democratic-controlled Board.

The joint employer standard is important to nearly all employers who use other companies, vendors, or contractors to assist them with their employees or business or who are in relationship with other companies.   For example, the joint employer standard asks whether a parent and a subsidiary company are truly separate employers or whether they should be considered one employer for purposes of collective bargaining. The joint employer standard seeks to determine whether a staffing company who provides employees is a joint employer with its customer client, or whether a franchisee's employees are also employees of the franchisor.  If a company is found to be a joint employer with another company, both companies will be required to bargain with a union elected by the employees and both will be liable for each other's unfair labor practices.

On December 14, 2017, new Board members Emanuel and Kaplan joined with now-Chairman Philip A. Miscimarra (who disagreed with the Browning-Ferris decision), to decisively overrule Browning-Ferris and return to the joint employer standard previously used for decades.  In its decision in Hy-Brand Industrial Contractors, Ltd., the Board announced:

In all future and pending cases, two or more entities will be deemed joint employers under the National Labor Relations Act (NLRA) if there is proof that one entity has exercised control over essential employment terms of another entity's employees (rather than merely having reserved the right to exercise control) and has done so directly and immediately (rather than indirectly) in a manner that is not limited and routine. Accordingly, under the pre-Browning Ferris standard restored today, proof of indirect control, contractually-reserved control that has never been exercised, or control that is limited and routine will not be sufficient to establish a joint-employer relationship.

The Board bluntly explained that the Browning-Ferris standard was "a distortion of common law, . . . contrary to the Act, [and] . . . ill-advised as a matter of policy."  Further, "its application would prevent the Board from discharging one of its primary responsibilities under the Act, which is to foster stability in labor-management relations." Indeed, the Board majority concluded "Browning-Ferris greatly expanded the joint-employer test without grappling with its practical implications for real-world collective-bargaining relationships."

The Board's decision in Hy-Brand is critically important to nearly all employers.  It restores predictability to this area of law and provides employers with the confidence to operate in an efficient and responsible manner. To read the Board's decision in Hy-Brand, which is chocked full of the type of reasoning that warms the heart of management advocates, click here.

KZA Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.