NLRB Overturns Joint Employer Rule

December 20, 2017

On Dec. 14, in a 3-2 decision, the National Labor Relations Board (NLRB) overruled the Board’s 2015 decision in Browning-Ferris Industries, 362 NLRB No. 186 (2015) and returned to the pre–Browning Ferris standard that governed joint-employer liability. That 2015 decision made it easier to hold companies liable for labor violations committed by their franchisees or contractors.

Chairman Philip A. Miscimarra (R) was joined by Members Marvin E. Kaplan (R) and William J. Emanuel (R) in the majority opinion. According to their decision, 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, 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 majority concluded that the reinstated standard adheres to the common law and is supported by the NLRA’s policy of promoting stability and predictability in bargaining relationships.

Applying the reinstated pre–Browning Ferris standard, the Board agreed with an administrative law judge’s determination that Hy-Brand Industrial Contractors, Ltd. (Hy-Brand) and Brandt Construction Co. (Brandt) were joint employers and therefore jointly and severally liable for the unlawful discharges of seven striking employees.

Members Mark Gaston Pearce (D) and Lauren McFerran (D) dissented in the case. In their dissenting opinion, Pearce and McFerran argued that the majority decision shouldn’t address the definition of joint employment at all. The case before the board concerned two Midwestern contracting companies — Hy-Brand Industrial Contractors, Ltd. and Brandt Construction Co. — that the Republican majority agreed were joint employers. So why bring Browning-Ferris into it? “No party in this case has asked the board to reconsider BFI,” they noted. And no briefs were solicited on whether to reverse Browning-Ferris . “To say that the majority is reaching out — and rushing — to reverse BFI is an understatement,” Pearce and McFerran wrote.

The House earlier this year passed a bill, Save Local Business Act (H.R. 3441) to undo Browning-Ferris permanently by imposing statutorily a joint-employer standard that required direct control of the employees in question. The Senate has not taken up the House bill yet; it faced steep odds even before Doug Jones (D-Ala.) narrowed the Republican’s Senate majority.

Finally, the NLRB Board was in a rush to push out this decision because NLBB Chairman Miscimarra’s term expired on Saturday, Dec. 16. The Board is now locked in a 2-2 split until Miscimarra’s replacement is confirmed. President Donald Trump is reportedly close to nominating John Ring, a management-side attorney at Morgan Lewis.