December 15, 2017

The Race to Change the NLRB's Joint Employer Standard Is Over. And the Winner Is . . .

After the National Labor Relations Board (NLRB) changed its joint employer standard in August 2015, two likely avenues to repeal that change emerged: Congress and the courts. In September of that year, congressional Republicans introduced legislation to return to the previous joint employer standard. Shortly thereafter, the losing party in the NLRB case, Browning-Ferris Industries of California (BFI), asked the D.C. Circuit Court of Appeals to do the same. Both efforts marched forward. The court heard oral argument in March 2017, and in November 2017 the House passed legislation that, if it became law, would repeal the NLRB’s BFI decision.

The NLRB Wins

In the end, the NLRB acted first. After Republicans gained half of the NLRB’s seats in August 2017 and a majority the following month, on December 14, 2017, the new Board voted along party lines to overturn BFI and revert to its previous joint employer standard. The case is called Hy-Brand Industrial Contractors, Ltd. and Brandt Construction Co.

Why Does the Joint Employer Standard Matter?

The National Labor Relations Act (NLRA) imposes bargaining obligations on unionized employers, and legal liabilities on employers—unionized or not—for violations of that law. If a second employer is a joint employer alongside the first one, it, too, can incur those bargaining obligations and liabilities. Plus, once two employers are joint employers, they are both vulnerable to strikes, picketing, and other economic protest activity from unions. The BFI joint employer standard made it much easier for the NLRB to find that two entities were joint employers.

What Is the Standard Now?

In the 2015 BFI ruling, the NLRB dramatically expanded the joint employer standard so that one entity could be a joint employer if it had the right to control the other’s employees, even if that right was only indirect and never exercised. Now, under Hy-Brand, the NLRB can still find that two entities are joint employers, but in order to do so:

  • Both entities must have actually 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
  • The control must not be “limited and routine”

For franchising in particular, after describing the BFI joint employer standard as “hugely disruptive” to franchising relations, the NLRB ruled that a franchisor’s control of its trademarks should not transform that franchisor into a joint employer. Federal trademark law requires franchisors to maintain standards and controls over their franchisees’ use of trademarks, which protects consumers and reaps benefits to franchisees. The NLRB reprimanded the BFI decision for threatening joint employer liability on franchisors who simply complied with requirements under federal trademark law to control the use of their trademarks.

This is significant for the entire franchise industry because it returns businesses to the certainty and predictability of the “direct and immediate” control test for joint employment.

What Comes Next?

The NLRB released a flurry of changes after Republicans took control the Board and, as of November 2017, the NLRB General Counsel’s office. That activity may slow now that one Republican Board Member, Philip Miscimarra, is stepping down from the Board on December 16, 2017. It will likely pick up again if the Senate confirms a new Board member to replace him. Once it does, the Board could also reverse Miller & Anderson, a 2016 NLRB case that made it easier for unions to organize joint employers.

Although the NLRB beat Congress and the D.C. Circuit to the punch, Congress and the court could still weigh in on the joint employment issue. Legislative action would make it harder for the NLRB to reverse course on the joint employment issue again.

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