The newly composed, Republican-majority NLRB has restored the more employer-friendly test for determining joint employer status. As part of a trend we predicted earlier this week, the decision overrules the Obama-Era Board's 2015 decision in Browning-Ferris Industries of California, Inc. d/b/a BFI Newby Island Recyclery, 362 NLRB No. 186 (2015). As a result, "direct and immediate control" is once again a prerequisite for finding joint employers.
In Browning-Ferris, a three-member majority of the NLRB held that two or more business entities will be joint employers based on the mere existence of "reserved" joint control, indirect control, or control that is limited and routine. Under the Browning-Ferris test, joint employer status would be found regardless of whether two entities have ever exercised joint control over essential terms and conditions of employment. Similarly, joint employer status would be found regardless of whether joint control is direct and immediate.
On December 14, 2017, by a similar 3-2 majority, the Board rejected Browning-Ferris and restored the previous standard for determining joint employer status through its decision in Hy-Brand Industrial Contractors, Ltd., 365 NLRB No. 156 (2017). Hy-Brand involved whether two entities, Hy-Brand and Brandt, are collectively joint employers jointly and severally liable for terminating five employees from Hy-Brand and two from Brandt in violation of the NLRA.
The Hy-Brand majority was critical of several aspects of the Browning-Ferris test, including the test's treatment of indirect control or even mere potential control, as potentially dispositive without requiring any evidence of direct control in any area. The majority reasoned that the Browning-Ferris test "abandoned . . . certainty and predictability . . . ."
In restoring the pre-Browning-Ferris standard, the majority explained that a finding of joint employer status once again requires proof that two or more entities have exercised joint control over essential employment terms (rather than merely reserving the right to do so). In addition, the control must be direct and immediate (rather than indirect). Critically, joint-employer status will not result from control that is limited and routine.
Applying this standard, the majority found Hy-Brand and Brandt were joint employers. Both had joint control through shared corporate personnel who were directly involved in the decision to terminate all seven employees. Both exercised this control through a common 401(k) plan, joint mandatory training, and annual meetings to review common employment policies such as the EEO policy and policies governing workplace conduct. Lastly, the joint control exercised by the entities had a direct and immediate impact on the seven terminated employees.
Hy-Brand's significance is clear. As the majority opined, Browning-Ferris expanded the test that makes two separate and independent entities a "joint employer. The result was to subject entities, such as those in a typical franchisor-franchisee relationship, to new joint bargaining and joint liability concerns. With the return to the pre-Browning-Ferris standard, however, "direct and immediate control" similar to that at issue in Hy-Brand is required as opposed to "limited and routine" supervision, which the majority described as one entity merely instructing employees of another entity as to what work to perform, where to perform the work, or when to do so, but not how to perform the work. While Hy-Brand's restoration of the pre-Browning Ferris standard is sure to bring relief to employers, it is a clear sign that employers should be aware of the Board's activity in the coming months, and we'll be here to help you do that.
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