NLRB Overrules Browning-Ferris Industries and Reinstates Prior Joint Employer Standard | Practical Law

NLRB Overrules Browning-Ferris Industries and Reinstates Prior Joint Employer Standard | Practical Law

In Hy-Brand Industrial Contractors, Ltd., the National Labor Relations Board (NLRB) overruled Browning-Ferris Industries, and returned to the standard that governed joint employer liability before that 2015 decision, specifically that joint employer status exists if the alleged joint employer entities have exercised joint control over essential employment terms, the control was "direct and immediate," and the control was not "limited and routine."

NLRB Overrules Browning-Ferris Industries and Reinstates Prior Joint Employer Standard

by Practical Law Labor & Employment
Law stated as of 06 Jun 2018 • USA (National/Federal)
In Hy-Brand Industrial Contractors, Ltd., the National Labor Relations Board (NLRB) overruled Browning-Ferris Industries, and returned to the standard that governed joint employer liability before that 2015 decision, specifically that joint employer status exists if the alleged joint employer entities have exercised joint control over essential employment terms, the control was "direct and immediate," and the control was not "limited and routine."
On December 14, 2017, in Hy-Brand Industrial Contractors, Ltd., the panel (Board) heading the NLRB's judicial functions held that finding joint employer status between two entities requires proof that the alleged joint employer entities have actually exercised joint control over essential employment terms, that the control was "direct and immediate," and that joint employer status was not "limited and routine." In reaching this conclusion, the Board overruled its decision in Browning-Ferris Industries, and returned to the "direct and immediate" standard that governed joint employer liability before that 2015 decision (362 N.L.R.B. No. 186 (2015)). (365 N.L.R.B. No. 156 (Dec. 14, 2017).)

Background

Several employees from Hy-Brand Industrial Contractors Ltd. and Brandt Construction Co. were discharged after engaging in work stoppages concerning their wages, benefits, and workplace safety.
An administrative law judge (ALJ) held that:

Outcome

The Board majority (Chairman Miscimarra, Member Kaplan, and Member Emanuel):
  • Agreed with the ALJ that the:
    • employee work stoppages were protected under the NLRA;
    • discharges unlawfully interfered with the exercise of protected rights in violation of Section 8 of the NLRA; and
    • Hy-Brand and Brandt were joint employers and jointly liable for the unlawful terminations.
  • Overruled the joint employment standard applied in Browning-Ferris Industries.
  • Reinstated the pre-Browning-Ferris Industries joint employer standard, under which:
    • the entities must exercise joint control over essential employment terms;
    • the control must be direct and immediate; and
    • joint employer status does not result from limited and routine control.
The Board noted that:
  • Under Browning-Ferris Industries, if two entities never exercised joint control over essential terms and conditions of employment, and any joint control was not direct and immediate, they could still be joint employers based on:
    • the mere existence of reserved joint control; or
    • indirect control or control that was limited and routine.
  • Before Browning-Ferris Industries:
    • joint employer status was determined by whether two entities exercised joint control over essential employment terms; and
    • evidence that an entity had simply reserved the right to exercise such control was insufficient to establish joint employer status.
    (See Flagstaff Medical Center, 357 N.L.R.B. 659, 667 (2011) (citing AM Property Holding Corp., 350 N.L.R.B. 998, 1001 (2007)), enfd. in part, 715 F.3d 928 (D.C. Cir. 2013).)
  • Browning-Ferris Industries:
    • significantly expanded joint employer status beyond any previous Board standard; and
    • evaded traditional common law principles that joint employment requires control.
The Board found that:
  • An entire line of precedent, including Airborne Express, TLI, Inc., Laerco Transportation, and AM Property Holding Corp. was overruled by Browning-Ferris Industries (338 N.L.R.B. 597 (2002); 271 N.L.R.B. 798 (1984), 269 N.L.R.B. 324 (1984); 350 N.L.R.B. 998, 1001 (2007)), enfd. in part, 715 F.3d 928 (D.C. Cir. 2013)).
  • There are five major problems with the majority's decision in Browning-Ferris Industries majority, namely that it:
    • far exceeded the Board's statutory authority by dramatically expanding "employer" and "employee" status;
    • relied in substantial part on a misplaced notion that present bargaining conditions represent a "radical departure" from "simpler times" when labor negotiations were unaffected by a direct employer's commercial dealings with other entities; however, Congress was aware of the many forms of subcontracting, outsourcing, and temporary employment relationships that have been in existence well before passage of the NLRA when Congress limited bargaining obligations to the "employer" and limited the definitions of "employer" and "employee";
    • mistakenly interpreted the deference courts have afforded the Board to draw factual distinctions when applying the common law agency standard as a grant of authority to modify the agency standard itself;
    • abandoned a longstanding test that provided certainty and predictability regarding the identity of an "employer" and replaced it with a vague and ill-defined standard that placed bargaining obligations on an entity based on a right to exercise indirect control (even if it never actually exercised this control); and
    • addressed the wrong target (a perceived inequality of bargaining leverage resulting from complex business relationships involving entities that do not participate in collective bargaining), issued the wrong remedy (expanding collective bargaining to an employer's business partners).
  • Parties should not have to guess the Board's intentions in advance and "be held liable when the agency announces its interpretations for the first time at an enforcement proceeding" (Christopher v. SmithKline Beecham Corp., 567 U.S. 142, 159 (2012)).
  • Reinstatement of the pre-Browning-Ferris Industries joint employment standard, which requires actual joint control, is clear, understandable, and stable.
In dissent, Member Pearce and Member McFerran argued that:
  • The Browning-Ferris Industries standard did not need to be reviewed.
  • The change in joint employment standard had no effect on the outcome of the decision of joint employer status in the present case.
  • The majority:
    • failed to give proper notice of the change in law; and
    • appears to have rushed to reverse Browning-Ferris Industries while that decision was being reviewed by the US Court of Appeals for the District of Columbia Circuit.

Practical Implications

The Board's decision in Hy-Brand Industrial Contractors, Ltd. reinstates the joint employment standard that was in effect before Browning-Ferris Industries. Under Browning-Ferris Industries, an entity's indirect control and unexercised ability or authority to control employment terms and conditions was a sufficient ground for finding an employment relationship. The Board's reversal in Hy-Brand Industrial Contractors, Ltd. provides firmer and clearer criteria for determining whether a joint employment relationship exists, which now requires 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 be:
    • "direct and immediate" (rather than indirect); and
    • not just "limited and routine."
This restored joint employment standard makes it less likely that the Board will find larger entities to be joint employers of their contractors' employees based on the "economic realities" of that relationship.
For a detailed discussion of the now-reversed Browning-Ferris Industries joint employment standard, see Legal Update, NLRB Issues New Joint Employer Standard, Blends Economic Realities Elements into Control Test.
Update: After the NLRB's Designated Agency Ethics Official determined that an Member Emanuel should have been disqualified from participating in Hy-Brand Industrial Contractors, the NLRB on February 26, 2018, vacated and set aside its December 14, 2017 Decision and Order to permit the NLRB to reconsider the case (366 N.L.R.B. No. 26 (Feb. 26, 2018) (Hy-Brand II)).
Update: On April 6, 2018, in Browning-Ferris Industries of California, Inc. v. National Labor Relations Board, the US Court of Appeals for the District of Columbia Circuit ordered that the motion to recall the mandate be granted (No. 16-1028 (D.C. April 6, 2018)).
Update: On June 6, 2018, in Hy-Brand Industrial Contractors, Ltd., the Board denied Hy-Brand Industrial Contractors, Ltd. and Brandt Construction Co's motion for reconsideration of Hy-Brand II, finding that they failed to identify any material error or extraordinary circumstances warranting reconsideration under Section 102.48(d)(1) of Board Regulations (366 NLRB No. 93, (June 6, 2018); 366 NLRB No. 94, (June 6, 2018)).

UPDATE

In Browning-Ferris Industries of California, Inc. v. NLRB, the majority of a three-judge panel of the US Court of Appeals for the District of Columbia Circuit affirmed in part the NLRB's joint-employer standard, but granted in part the putative joint employer's petition for review. The DC Circuit ruled that the NLRB may, consistent with the common law of agency, consider both reserved authority to control and indirect control to be relevant factors in its joint-employer analysis. However, the court held that the Board failed to adequately articulate and apply the indirect-control element to the case's facts. The NLRB also failed to explain how it would determine "whether the putative joint employer possesses sufficient control over employees' essential terms and conditions of employment to permit meaningful collective bargaining," the second step in its joint employer analysis after it reviews the common law factors. The DC Circuit remanded the case to the NLRB for further proceedings consistent with its opinion. ( (D.C. Cir. Dec. 28, 2018).) Barring a petition for en banc review, the remanded case potentially provides the NLRB an opportunity to review and revise its joint-employer standard within the limits of the law of the case on a track parallel to its pending rulemaking. (See Legal Update, DC Circuit Upholds Part of NLRB's 2015 Joint Employer Analysis, Pans its Ambiguous Application to Facts.)