On Thursday, December 14, 2017, employers scored a significant victory at the National Labor Relations Board. The Board, in a straight 3-2 partisan vote, reversed its 2015 decision in Browning-Ferris Industries and eliminated the rule that employers and their contractors or franchisees can be deemed a “joint employer” even when one company does not exert direct control over the second entity’s workers.
In Hy-Brand Industrial Contractors Ltd. and Brandt Construction Co., NLRB Chair Philip Miscimarra, joined by the two newest NLRB board members, William Emanuel and Marvin Kaplan, significantly reduced the scope of joint employer status in reversing BFI. The issue over the scope of joint employer status at the Board has been simmering for some time, as NLRB Chair Miscimarra wrote a dissenting opinion in the 2015 BFI decision, which was issued under the Obama administration when Democrat members held the Board majority.
The decision returns federal labor law to where it was prior to 2015. Under the National Labor Relations Act, joint employer status now will arise only where there is proof of “direct and immediate” control by a company of another entity’s employees. Hy-Brand expressly reversed the expansive standard from 2015, which held that “indirect control” could be sufficient to establish joint employer status. Per the Board, the test is now:
“A finding of joint-employer status shall once again require proof that putative joint employer entities have 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), and joint-employer status will not result from control that is ‘limited and routine.’”
In reaching its decision, the majority echoed the concerns of many employers since BFI that the 2015 standard was a “distortion of common law” and that continuing it would be “ill-advised.”
Companies that operate with these types of contractual relations must remain vigilant and careful. Hy-Brand Industries did not eliminate the joint employer test. It simply returned it to its more stringent pre-2015 standard. Indeed, the Board actually held that the companies in Hy-Brand Industries were joint employers, based on its analysis under the new and revived more rigid standard.
While it is still early in the new NLRB’s tenure (and even though Chair Miscimarra has now departed), this case provides early encouragement to employers who hoped that the current Administration would roll back a number of rulings from the last Administration. In one of its first truly high-profile cases and with a chance to weigh in on a key management-labor issue, the Board tallied one for employers last week.
The full citations are Hy-Brand Industrial Contractors Ltd. and Brandt Construction Co., case numbers 25–CA–163189, 25–CA–163208, 25–CA–163297, 25–CA–163317, 25–CA–163373, 25–CA–163376, 25–CA–163398, 25–CA–163414, 25–CA–164941, and 25–CA–164945, all before the National Labor Relations Board.