On December 14, 2017, the National Labor Relations Board (“NLRB”) in Hy-Brand Industrial Contractors, Ltd. overruled its 2015 decision in Browning-Ferris Industries, which had redefined the joint-employer liability standard under the National Labor Relations Act (“NLRA”). Going forward, the NLRB will apply its earlier joint-employer liability standard.

“Joint employer” is the legal doctrine whereby one business can be held legally liable for the employment law violations of another business, such as a subcontractor or franchisee. In Browning-Ferris, the NLRB held that simply having the right to control another business’s workers, even if that right is never exercised, was sufficient to confer joint employer liability. The NLRB’s Browning-Ferris decision was roundly denounced by businesses. In response, Congress proposed legislation—the Save Local Business Act (H.R. 3441)—that, if passed, would restrict the definition of “joint employer” under both the NLRA and the Fair Labor Standards Act (FLSA) to businesses that actually control another business’s workers. The Save Local Business Act passed the House with bipartisan support and is pending in the Senate.

The NLRB must have seen the writing on the wall when it issued an opinion in Hy-Brand Industrial Contractors, Ltd. that described the Browning-Ferris decision as “a distortion of common law … contrary to the [NLRA], … [and] ill-advised as a matter of policy … .” Based on this reversal of Browning-Ferris, the NLRB announced that in future and pending cases, two or more entities will be deemed joint employers under the NLRA only 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.” This means that going forward, “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 NLRB’s rejection of its own Browning-Ferris fiasco is welcome news to employers. But take heed: even under the more restrictive definition of joint employer, the NLRB still found that the respondents in the Hy-Brand Industrial Contractors, Ltd. case were joint employers and thus liable for each other’s violations of the NLRA because the same decisionmaker decided employee terminations for both businesses and the two businesses’ employees participated in the same benefits plans and attended the same corporate training. It is still critical that businesses evaluate potential liability for subcontractors’ or franchisees’ misdeeds, particularly when providing or sharing labor.