Alerts and Updates

NLRB Withdraws Key Joint-Employer Decision

March 7, 2018

With Hy-Brand vacated, Browning-Ferris again is the standard used by the Board and administrative law judges to evaluate joint-employer issues.

On February 26, 2018, the National Labor Relations Board (“NLRB” or the “Board”) vacated its Hy-Brand decision, which had reinstated a more employer friendly joint-employer standard. The decision of the Board to vacate Hy-Brand followed a report from the NLRB Inspector General that found one of the Board’s members, William Emanuel, was disqualified from participating in Hy-Brand because his former law firm previously had represented one of the parties in the case it overturned, Browning-Ferris. See our previous Alert discussing the Hy-Brand case, which was decided in December 2017.

The NLRB Inspector General’s report was based on Executive Order 13770, which prohibits an appointee from participating in a “particular matter involving specific parties” when the appointee’s former employer or client is a party or represents a party. The Inspector General concluded that Hy-Brand and Browning-Ferris were the same “particular matter involving specific parties” and thus Emanuel should not have participated in Hy-Brand. The Inspector General’s conclusion was based, in part, on the fact that the majority holding in Hy-Brand incorporated the dissent in Browning-Ferris and that the Board was involved in an active enforcement proceeding in Browning-Ferris that was affected by the Hy-Brand decision.

Under Hy-Brand, two or more entities would be deemed joint employers under the NLRA if there is proof that one entity has exercised control over essential employment terms of another entity’s employees and has done so directly and immediately in a matter that is not limited and routine. Proof of indirect control, contractually reserved control that has never been exercised, or control that is limited and routine would be insufficient to establish a joint-employer relationship.

With Hy-Brand vacated, Browning-Ferris again is the standard used by the Board and administrative law judges to evaluate joint-employer issues. Under Browning-Ferris, even when two entities have never exercised joint control over essential terms and conditions of employment and where joint control is not “direct and immediate,” the two entities will still be joint-employers based on the mere existence of reserved joint control or based on indirect control, even when such control is “limited and routine.”

While it would be reasonable to expect the current Board to revisit its joint-employer standard in a future case and issue a decision along the lines of Hy-Brand, it is unclear whether Emanuel would be able to participate in such a decision, as a new case that overturns Browning-Ferris arguably would involve the same ethical issues for Emanuel as in Hy-Brand. If Emanuel recuses himself, there would not be a 3-2 Republican majority on the Board and it is very possible the Board would be deadlocked and not overturn Browning-Ferris. Perhaps aware of this issue, the Board has asked the U.S. Court of Appeals for the D.C. Circuit to recall the Browning-Ferris enforcement action, which the D.C. Circuit had remanded to the Board in light of the Hy-Brand decision. The D.C. Circuit ultimately could reject the Board’s expanded joint-employer standard in Browning-Ferris.

What This Means for Employers

Employers with contractor-subcontractor, franchise-franchisee, user-supplier, and parent-subsidiary relationships, that were relieved by a more employer friendly joint-employer standard was declared in Hy-Brand, now will have such relationships evaluated under the greatly expanded definition of joint employer in Browning-Ferris. We will continue to monitor and provide updates regarding further developments in the Browning-Ferris D.C. Circuit enforcement action and any future changes to the Board’s joint-employer standard.

For Further Information

If you have any questions about this Alert, please contact any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.