NLRB Reverses Obama-Era Joint Employer Ruling
The National Labor Relations Act’s (NLRA) test for determining whether multiple businesses are joint employers has been restored to its traditional interpretation by the Republican-Majority National Labor Relations Board (NLRB). In Hy-Brand Indus. Contractors, Ltd.,FN1 the NLRB overruled Browning-Ferris Indus., FN2 one of the Obama-era NLRB’s more contentious rulings, in a 3-2 decision, calling the Browning-Ferris decision “a distortion of common law as interpreted by the Board and the courts.”
The Browning-Ferris Decision
In the August 2015 Browning-Ferris decision, the NLRB held that a business could be found to be a joint employer with another employer even if a company merely had indirect orpotential control over workers who were formally employed by another entity, regardless of whether the company actually exercised that control. The Browning-Ferris “indirect control” test posed a significant threat to the continuing viability of the franchise business model, by significantly expanding franchisors’ potential liability in matters related to employees of franchisees. The indirect control test also increased the risk of liability for staffing agencies and business contractors.
Return to the Traditional Joint-Employer Test
For nearly 30 years before the Browning-Ferris, the NLRB held that multiple entitles could be considered joint employers of a group of employees only if each exercised direct and immediate control over a group of employees. The NLRB’s recent decision overturning Browning-Ferris returns to this traditional joint employer test.
On December 14, 2017, the NLBR enumerated the traditional test in a press release:
In all future and pending cases, two or more entities will be deemed joint employers under the NLRA if there is proffer 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. FN3
Impact for Employers
Employers, particularly those who have contractual relationships with prime contractors or subcontractors, staffing agencies, and franchisors, can breathe a sigh of relief knowing that a finding of joint-employer status will require actual control exercised over essential terms and conditions of employment. We will continue to update you on the practical impact of this decision as new cases are addressed by the NLRB under the reinstated joint-employer test.
FN1 365 NLRB No. 156 (Dec. 14, 2017)
FN2 362 NLRB No. 186 (2015). The Browning-Ferris decision was appealed, and, at the time the NLRB re-instated the traditional joint employer test, the case was pending before the D.C. Circuit Court of Appeals. On December 19, 2017, the NLRB filed a motion to remand the Browning-Ferris case, in light of the Hy-Brand decision. The D.C. Circuit granted the motion and remanded the case to the NLRB.