Republican-Led NLRB Reverses Obama-Era Joint Employment Ruling

Author: Robert S. Teachout, XpertHR Legal Editor

December 18, 2017

The National Labor Relations Board (NLRB) has reversed an Obama-era ruling that had greatly expanded the definition of joint-employers. In its Hy-Brand Industrial Contractors ruling, the Board explicitly overruled the 2015 Browning-Ferris Industries decision and restored the joint-employer standard that had been followed for decades.

Browning-Ferris held that two entities would be considered a joint employer even if they exercised only indirect control of shared employees or reserved the right for such control. Many feared that if the standard survived judicial review, it could harm the franchise business model by holding corporations responsible for the activities of individual franchisees. The standard also significantly impacted temporary staffing agencies and general contractors.

In its Hy-Brand ruling, the newly Republican-led Board stated that a finding of joint-employer status requires proof that:

  • The alleged joint-employers have actually exercised joint control over essential employment terms;
  • The control is direct and immediate; and
  • The control is not "limited and routine."

Congress also is considering legislation to limit the circumstances under which an employer is considered a "joint employer" under federal employment laws.

Management-side employment law attorneys welcomed the ruling. Kurt Larkin, a partner with Hunton & Williams, told XpertHR, "The Board's decision to return to the "direct and immediate" control test provides employers with a much-needed dose of predictability into planning their third-party business relationships." Larkin added that the decision "will bring stability back to labor relations by allowing employers and unions to once again know who is going to be at the bargaining table."

Unions and employee-side attorneys disagree, saying that large corporations have always basically set the rules for their franchisees. Florida employee advocacy attorney Donna Ballman told CBS Moneywatch the decision protects the parent company. "What we're going to see is these large companies taking a hands-off attitude and saying "it's not my problem" for all kinds of their franchises' labor law violations," she said. Ballman predicts that this will make enforcing the laws more difficult and result in more abuse of employees.

NLRB Chairman Philip A. Miscimarra was joined in the majority opinion by Members Marvin E. Kaplan and William J. Emanuel. Members Mark Gaston Pearce and Lauren McFerran dissented. The 3-2 decision was one of several last week that overturn recent rulings of the prior Democrat-led Board under the Obama administration.

Republicans only gained a majority on the NLRB on September 26, when Emanuel was sworn in. That majority ended when Miscimarra's term expired on December 16. The NLRB will remain split until a new appointee by President Donald Trump is confirmed.