On December 14, 2017, the National Labor Relations Board (the “Board”) issued two landmark decisions. They are of note because they directly and substantively address two issues that have vexed employers for a number of years: (1) When can two separate and distinct corporate entities be treated as joint-employers for NLRA purposes? and (2) When is a work rule or handbook policy unlawfully overbroad under the NLRA?

As to the first question, the Board re-adopted the common law test which focuses on whether the purported employer has “direct and immediate” control over the employees. As to the second question, the Board created a new test that requires a greater degree of balancing between the protections of the Act and the employer’s legitimate business interests.

The Board re-adopts the “direct and immediate control” test for joint-employer status.

In Hy-Brand Indus. Contractors, the Board abandoned the “economic realities” test for determining joint-employer status for NLRA purposes and re-adopted the “direct and immediate control” test that was in place prior to the Browning-Ferris decision:

“[T]he Browning-Ferris majority opinion did not represent a ‘return to the traditional test used by the Board,’ . . . Rather, the Browning-Ferris joint-employer test fundamentally altered the law applicable to user-supplied, lessor-lessee, parent-subsidiary, contractor-subcontractor, franchisor-franchisee, predecessor-successor, creditor-debtor, and contractor-consumer business relationships under the Act. . . . For all these reasons, we return today to pre-Browning-Ferris precedent. Thus, a finding of joint-employer status shall once 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 the joint-employer status will not result from control that is ‘limited and routine.’” See Hy-Brand Industrial Contractors, Ltd., Case No. 365 NLRB No. 156, pg. 5 (Dec. 14, 2017).

The Board abandons the “could reasonably construe” standard and implements a comprehensive balancing standard.

In Boeing Co and SPEA., the Board abandoned the Lutheran Heritage Village-Livonia standard for determining whether a work rule or handbook policy is unlawfully overbroad and implemented a more nuanced test that requires a balancing of the employer’s legitimate business interests with the employees’ section 7 rights depending upon the type of rule or policy being considered:

“Under the standard we adopt today, when evaluating a facially neutral policy, rule or handbook provision that, when reasonably interpreted, would potentially interfere with the exercise of NLRA rights, the Board will evaluate two things: (i) the nature and extent of the potential impact on NLRA rights, and (ii) legitimate justifications associated with the rule. We emphasize that the Board will conduct this evaluation, consistent with the Board’s ‘duty to strike a proper balance between . . . asserted business justifications and the invasion of employee rights in light of the Act and its policy,’ focusing on the perspective or employees, which is consistent with Section 8(a)(1). As a result of this balancing, in this and future cases, the Board will delineate three categories of employment policies, rules and handbook provisions . . . :” See Boeing Company and SPEA, 365 NLRB No. 154, pg. 3. (December 14, 2017).

Key Takeaways

  • For NLRA purposes, employers are now subject to a more favorable standard for determining whether they can be considered a joint-employer for a particular group of workers.
  • The Board is now required to engage in a more nuanced analysis when it is determining whether a facially neutral work rule or employee handbook policy is unlawfully overbroad under the NLRA.