Trump-Era NLRB Raises the Bar for Determining Joint-Employer Relationship

The joint employer standard has long been a hotly contested issue because it is used to determine whether one employer may become liable for the employment actions and policies of another. On December 14, 2017, the National Labor Relations Board’s (NLRB) decision in  Hy-Brand Industrial Contractors, Ltd., 365 NLRB No. 156 (2017) overruled its controversial decision in Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (2015), which vastly expanded  the joint-employer doctrine.

Under the Browning-Ferris standard, indirect control of an employee could constitute a joint-employer relationship. This decision, reached in August 2015, ended over 30 years of precedent which analyzed whether the alleged joint employer actually exercised “direct and immediate control” over the essential terms and conditions of the relevant worker’s employment, such as hiring, firing, discipline, supervision and direction. The Obama-era Board reasoned in Browning-Ferris that a joint-employer relationship exists where indirect control through an intermediary or the reserved right to control, even if unexercised, may be sufficient to find a joint-employer relationship. In effect, this decision served to lower the bar for imposing joint-employer liability.

In its Hy-Brand ruling, a new 3-2 Board majority renounced the Browning-Ferris standard and restored the traditional joint-employer standard, which they found was consistent with common-law. The Board announced “[i]n all future and pending cases, two or more entities will be deemed joint employers under the National Labor Relations Act (NLRA) 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.”

Following its Hy-Brand decision, the NLRB asked the D.C. Circuit to remand an appeal of its controversial Browning-Ferris Industries ruling, noting it would reconsider its ruling in light of the return to the traditional standard.

The new decision is a welcome relief for many employers and particularly for franchisors, as it means that there is less likelihood that the NLRB will deem a franchisor a joint employer of its franchisees’ employees simply because the franchisor enforces system-wide brand standards or has incidental contact with its franchisees’ workforce.

However, the Hy-Brand decision may not stand for long. As noted by the Hy-Brand dissenters, who previously made up part of the  Browning-Ferris majority, the decision to overturn Browning-Ferris came after only two years, without seeking public comment, and resulted most directly from changes in the political make-up of the five-member Board. Thus, future Board changes could lead to a return to the Browning-Ferris standard.