NLRB Goes Back on 'Joint Employer' Ruling
The National Labor Board unanimously vacated its December Hy-Brand joint employer ruling Monday (February 26), meaning restaurant operators around the nation will once again be subject to the 2015 Browning-Ferris test for determining joint employment.
The NLRB did so following an inspector general report that said board member Bill Emanuel should have recused himself from voting in the case.
The ruling reverts, at least for now, to the Obama-era precedent stemming from the Hy-Brand Industrial Contractors, Ltd. decision, which dramatically narrowed the situations where the joint employer doctrine could be applied. Daniel Handman, a partner at Hirschfeld Kraemer LLP, explained it at such: “Before 2015, the board required employees seeking to invoke the joint employer doctrine that each employer ‘directly and immediately’ exercised control over the terms and conditions of employment of the workers at issue. That standard proved tricky for employees and their advocates, as decisions involving pay and discipline were often much more indirect than the standard required.”
“In 2015, the Obama board decided Browning-Ferris Industries, a decision which substantially reduced the burden for employees. Rather than requiring proof of direct and immediate control, the Obama board allowed for “indirect” control over wages and other terms of employment. More importantly, the board found that actual control was not required; it was sufficient if a separate company reserved itself the right to control terms of employment.”
This was a significant departure because it opened the doors to franchisors with deep pockets, Handman added, such as McDonald’s.
“Indeed, labor unions led the fight for a $15 minimum hourly wage at fast food restaurants based in part on the promise that Browning-Ferris would open the doors to organized labor at those restaurants,” he added.
In December that changed when a party-line 3-2 decision found that in all future and pending cases, the board will only consider two companies to be joint employers if there is proof that one entity has actually exercised control over “essential employment terms” of another entity’s employees. No longer will proof of indirect control or the potential exercise of control suffice, as it did under Browning-Ferris.
Monday’s announcement sets the wheel back yet again. Now corporations will find themselves potentially liable for workplace law violations at their franchisees, despite the fact many are independent or privately owned.
“The National Labor Relations Board (3-0, Member Emanuel did not participate) today issued an order vacating the Board's decision in Hy-Brand Industrial Contractors, Ltd. and Brandt Construction Co., 365 NLRB No. 156 (2017), in light of the determination by the Board’s Designated Agency Ethics Official that Member Emanuel is, and should have been, disqualified from participating in this proceeding,” the NLRB said in a statement. “Because the Board's Decision and Order in Hy-Brand has been vacated, the overruling of the Board's decision in Browning-Ferris Industries, 362 NLRB No. 186 (2015), set forth therein is of no force or effect.”
In a February 9 report to the NLRB, Inspector General David Berry said Emanuel should have been recused due to potential conflicts of interest. Emanuel, who was appointed to the board by President Donald Trump, had a management-side law firm—Littler Mendelson—that represented one of the clients in Browning-Ferris.
Berry said the cases were linked since the ruling in Hy-Brand incorporated elements from the dissent in Browning-Ferris. This probe was promoted by Democratic lawmakers, including Sen. Elizabeth Warren of Massachusetts.
Trump had nominated business lawyer John Ring to fill the fifth seat of the board, which is currently split 2-2 between Republican and Democratic appointees. If Emanuel recuses himself from a future vote to overturn Browning-Ferris, the board would not have a GOP majority, meaning this law might not change anytime soon.
Jonathan Eisen, senior vice president, government relations of the International Foodservice Distributors Association, released the following statement: "The National Labor Relations Board yesterday vacated a decision overturning the Obama Administration’s joint employer rule. As a result, the Obama Board’s joint employer standard remains in place, which is bad news for businesses large and small. Until the matter is cleared up, businesses face confusing and uncertain labor costs. This puts jobs and businesses at risk, leading to decreased opportunities for entrepreneurs and less job creation. It’s time for the Senate to pass the Save Local Business Act, passed by the House in November. This legislation provides much needed clarity, protects business relationships, and promotes economic growth."