NLRB Reverses Precedent on Joint Employer Liability and Standard Governing Employee Handbooks

This afternoon, just two days prior to the end of Chairman Philip Miscimarra’s term, the NLRB issued a pair of 3-2 decisions overruling significant precedent regarding joint-employer status and the legal standard governing whether workplace rules violate the exercise of Section 7 rights under the Act. A more detailed analysis will follow, but here are the main takeaways.

Joint-Employer StatusHy-Brand Industrial Contractors, Ltd., 365 NLRB No. 156 (2017)

The Board completely rejected the standard set forth in Browning-Ferris Industries, 362 NLRB No. 186 (2015), and now returns to the far more rigorous showing that had been required for years to establish joint-employer status:

  • Proof that the alleged joint-employer entities have actually 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.”

The Board reverted to the standard that pre-dated Browning-Ferris and explained that this standard aligns with common law, would best “foster stability in labor-management relations” and is consistent with holdings of state and federal courts. Applying this new standard, the Board nevertheless found that the two entities in the case were joint employers under the Act.

Workplace and Employee Handbook PoliciesBoeing Company, 365 NLRB No. 154 (2017)

The Board also overruled the “reasonably construed” to prohibit the exercise of NLRA rights standard that had been used by the Board to determine whether workplace rules unlawfully interfered with the exercise of Section 7 rights since its decision in Lutheran Heritage, 343 NLRB 646 (2004).

Now, when interpreting a facially neutral policy, rule or handbook provision, the Board will use its newly established balancing test requiring it to weigh the nature and extent of the potential impact of the rule on NLRA rights and legitimate employer justifications associated with the rule.

In order to provide clarity in applying this standard, the Board identified three categories of the types of employee workplace rules: (1) lawful rules (e.g., no-camera rule, rules regarding basic standards of civility), (2) rules that require individualized scrutiny, and (3) unlawful rules (e.g., rules prohibiting employees from discussing wages or benefits with each other) that it expects all future cases to fall within

These were two of several issues foreshadowed by General Counsel Robb’s December 1st Memo. The complete 5-member Board remains intact only until the end of the day on Saturday, so more activity may be forthcoming. Stay tuned…