It was just two years ago that the National Labor Relations Board (“NLRB” or “the Board”) issued its landmark joint employer decision in Browning-Ferris Industries of California Inc., d/b/a BFI Newby Island Recyclery, 362 NLRB No. 186 (August 27, 2015) (“Browning Ferris”), which significantly broadened the standard for determining when two separate legal entities could be considered joint employers for labor relations purposes. The new Trump Board Majority has already said goodbye to the standard.

In a 3-2 decision issued on December 14, 2017, the new Board Majority (composed of Chairman Phillip Miscimarra, and Members Marvin Kaplan and William Emanuel) overturned Browning-Ferris and returned to the pre-Browning-Ferris direct control test to determine whether a joint employment relationship exists for labor relations purposes. The full decision, Hy-Brand Industrial Contractors, et al., is available here.

Browning-Ferris

In Browning-Ferris, the Board Majority held that two or more entities were joint employers of the same employees for labor relations purposes “if they share or co-determine those matters governing the essential terms and conditions of employment,” based on an employer’s right of control, which could include indirect control, regardless of the exercise of actual control. This standard overturned decades of Board precedent holding that joint employment status was based on a showing that two entities exercised “direct and immediate” joint control over the essential employment terms of employees.

The Browning Ferris decision ushered in several legal challenges and a bill — passed by the House of Representatives — seeking to reverse, among other things, the expanded theory of joint employment liability under Browning-Ferris.

Hy-Brand Industrial Contractors: A Return to the Direct Control Test

In Hy-Brand Industrial Contractors, the Board Majority did not mince words and found that the Browning-Ferris decision presented five “major problems” requiring that it be overturned. These problems, included:

(1) the Board exceeding its statutory authority by expanding the concepts and definitions of “employee” and “employer” beyond their common law limits.

(2) the rationale for altering the NLRA’s definition of “employer” being based on a flawed assumption that present employment conditions are unique to the current economy;

(3) the Board having effectively assumed the role of Congress by changing the common law agency standard;

(4) the replacement of a test that provided certainty and predictability with “a vague and ill-defined standard;” and

(5) using the “wrong remedy” to correct a perceived inequality of bargaining leverage.

Based on these considerations, the Board held that it was overturning Browning-Ferris and returning to “pre-Browning-Ferris” precedent and that its decision would be applied retroactively to the Hy-Brand case and all pending cases. Accordingly, the Board held that a finding of joint employer status will again require proof that “putative joint employer entities have exercised joint control over essential employment terms (rather than merely having ‘reserved’ the right to exercise control), the control must be ‘direct and immediate’ (rather than indirect), and joint-employer status will not result from control that is ‘limited and routine.’”

However, by no means does the Board’s decision do away with the concept of joint employment under the NLRA. Indeed, the Board actually held that the two companies at issue, Hy-Brand Contractors and Brandt Construction Company, were joint employers under the NLRA assubstantial evidence showed that the two entities exercised joint control over the employees. In particular, the same individual served as Corporate Secretary for both companies, was involved in the decision to discharge contracted employees, and was the primary individual making hiring decisions of the contracted employees. In addition, the companies participated in the same 401(k) and health plans and, among other things, were covered by the same workers’ compensation policy.

What’s Next?

This ruling will be welcome by franchisors and entities that utilize contract labor, given that it does away with the “indirect” control standard set forth in Browning-Ferris. Employers, however, should be mindful that this decision only impacts joint employment standards as it relates to issues that arise under the National Labor Relations Act, such as collective bargaining and unfair labor practices. The ruling does not impact joint employment issues that have been raised under the Fair Labor Standards Act or other laws. That being said, employers who modified business contracts based on the standard enunciated in Browning-Ferris should consider reviewing such contracts to see whether more beneficial provisions could be included under the standard announced in Hy-Brand.