United States: NLRB Overturns Obama Board's Expansion Of The Joint-Employer Doctrine

Last Updated: December 20 2017
Article by Michael Starr

Michael Starr is an attorney in Holland & Knight's New York office


  • A recent National Labor Relations Board decision unexpectedly reversed a controversial Labor Board ruling issued during the Obama administration that had dramatically expanded the joint-employer doctrine and made companies potentially liable for labor law compliance with respect to another company's employees.
  • The reasoning of the Board in Hy-Brand Industrial Contractors Ltd., is as significant as the ruling.
  • It must be cautioned, however, that the Hy-Brand decision does not completely resolve the recent joint-employer controversy. Other federal employment laws, notably, the Fair Labor Standards Act, do not limit the concept of "employer" to common-law agency principles.

In Hy-Brand Industrial Contractors Ltd., 365 NLRB No. 156 (Dec. 14, 2017), the National Labor Relations Board (NLRB) has unexpectedly reversed a controversial Labor Board ruling issued during the Obama administration that had dramatically expanded the joint-employer doctrine and made companies potentially liable for labor law compliance with respect to another company's employees. The reasoning of the Board in Hy-Brand is as significant as the ruling.

Under long-established legal doctrine, a company found to be a joint-employer with another company that formally employs certain workers has labor law obligations to those workers, and their union, even though those workers were not directly employed by the asserted joint-employer. Business relationships that gave rise to potential joint-employer obligations were widespread, including building owners and their cleaning contractors, companies that subcontracted parts of the operations, companies that obtained on-site workers from a staffing companies, and, especially in recent years, franchisors and their franchisees' employees.

But just over two years ago, the NLRB, which was then controlled by Democrats appointed by former President Barack Obama, decided Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (2015), pending review, No. 16-1028 (D.C. Cir. filed Jan. 20, 2016). Browning-Ferris represented a significant shift in established Board law, dramatically expanding the joint-employer doctrine. Under that expanded standard, many independent companies with some degree of economic interdependence could be found to be joint-employers, and the company that only indirectly or merely potentially affected the employment terms of another company's workers could have, retrospectively, liability for the primary employer's noncompliance with labor law obligations.

In Hy-Brand, the Labor Board, which is now controlled by Republicans, two of whom were recently appointed by President Donald Trump, overruled Browning-Ferris and expressly "restore[d]" the law to what it previously had been. 365 NLRB No. 156 at 6.

Consequently, as of today, two independent businesses cannot be joint-employers for purposes of the National Labor Relations Act (NLRA) unless they share or codetermine matters governing the essential terms and conditions of employment. Moreover, the putative joint-employer:

  • must have actually exercised control over the other company's employees (not just have contractually reserved control over some terms, such as, the right to reject new hires)
  • must have direct and immediate control over essential terms of employment (not just indirect impact with respect to matters incidental to the employment relationship)
  • must have more than global oversight over the other company's employees, that is, something more than limited and routine supervision over when those workers work and what tasks they perform

Equally significant are the Board's two basic reasons for its Hy-Brand ruling. The first was that Browning-Ferris had impermissibly extended traditional common-law agency principles that govern what entities could or could not be employers for purposes of the NLRA. The second was that the Browning-Ferris standard, in actual practice, "threatened to produce wide-ranging instability in [collective] bargaining relationships." Id. at 5. The latter reason is particularly noteworthy because, while courts might disagree with the NLRB's legal analysis and overturn its Hy-Brand ruling for that reason, the Labor Board's policy determinations as to what does or does not promote labor peace are within its discretion and essentially immune from judicial review. This emphasis on stability and clarity likely will be a driving force in future Board decisions. It already has been used to reverse the Obama Board's rule on several issues, including with respect to labor law limitations on policies that are impermissible for employee handbooks for both unionized and nonunion employers. See The Boeing Co. 365 NLRB No. 154 (Dec. 17, 2017) overruling, Lutheran Heritage Village-Livonia, 343 NLRB 646 (2004)

It must be cautioned, however, that the Hy-Brand decision does not completely resolve the recent joint-employer controversy. Other federal employment laws, notably, the Fair Labor Standards Act, do not limit the concept of "employer" to common-law agency principles. Courts applying those statutes have, in recent years, broadened the joint-employer doctrine. Whether the Hy-Brand decision will lead to a more limited approach to joint-employer liability for other areas of federal law remains to be seen.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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