Joint-Employer Pain Relief: New NLRB Overturns Browning Ferris
In a sharply-divided 35-page, 3-2 decision, the new Trump National Labor Relations Board (NLRB or Board) dismantled the joint employer standard established by the prior Obama Board’s decision in Browning-Ferris Industries of California, Inc. d/b/a BFI Newby Island Recyclery (Browning-Ferris). The new decision was issued on December 14, 2017 in a case involving Hy-Brand Industrial Contractors, Ltd. and Brandt Construction Co., as a single employer and/or joint employers (“Hybrand”).
In Browning-Ferris, the Board majority held that even when two entities have never exercised joint control over essential terms and conditions of employment, and even when any joint control is not “direct and immediate,” the two entities will still be considered joint employers if they merely exercise “reserved” joint control, indirect control, or control that is “limited and routine.” The new Board asserted that the Browning-Ferris standard “is a distortion of common law as interpreted by the Board and the courts; it is contrary to the [National Labor Relations Act]; it is ill-advised as a matter of policy; and its application would prevent the Board from discharging one of its primary responsibilities under the Act, which is to foster stability in labor-management relations.”
According to the majority, the Browning-Ferris standard could potentially be applied to a vast number of contractual relationships, including relationships involving:
The majority overruled Browning-Ferris and restored the joint-employer standard that existed prior to the Browning-Ferris decision. According to the majority, “a finding of joint-employer status requires proof that the alleged joint-employer entities have actually exercised joint control over essential employment terms (rather than merely having ‘reserved’ the right to exercise control), and 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 dissent, Members Pearce and McFerran fiercely defended Browning-Ferris (BFI), asserting that the majority “reflexively reverses precedent even though:
The dissent took an obvious swipe at the majority: “[T]o say that the majority is reaching out—and rushing—to reverse BFI is an understatement.”
For employers in potential joint-employment situations, Hy-Brand is welcomed relief. The case may be appealed to the courts, who may or may not overturn it. But if the case ultimately makes it to the current Supreme Court, it is likely to be affirmed.
Arent Fox’s Labor & Employment group will continue to monitor developments in this area. If you have any questions, please contact Michael Stevens, Alexandra Romero, or the Arent Fox professional who usually handles your matters.
In Browning-Ferris, the Board majority held that even when two entities have never exercised joint control over essential terms and conditions of employment, and even when any joint control is not “direct and immediate,” the two entities will still be considered joint employers if they merely exercise “reserved” joint control, indirect control, or control that is “limited and routine.” The new Board asserted that the Browning-Ferris standard “is a distortion of common law as interpreted by the Board and the courts; it is contrary to the [National Labor Relations Act]; it is ill-advised as a matter of policy; and its application would prevent the Board from discharging one of its primary responsibilities under the Act, which is to foster stability in labor-management relations.”
According to the majority, the Browning-Ferris standard could potentially be applied to a vast number of contractual relationships, including relationships involving:
- Insurance companies that require employers to take certain actions with their employees in order to comply with policy requirements for safety, security, health, etc.;
- Franchisors;
- Banks or other lenders whose financing terms may require certain performance measurements;
- Any company that negotiates specific quality or product requirements;
- Any company that grants access to its facilities for a contractor to perform services there, and then regulates the contractor’s access to the property for the duration of the contract;
- Any company that is concerned about the quality of contracted services;
- Consumers or small businesses who dictate times, manner, and some methods of performance of contractors.
The majority overruled Browning-Ferris and restored the joint-employer standard that existed prior to the Browning-Ferris decision. According to the majority, “a finding of joint-employer status requires proof that the alleged joint-employer entities have actually exercised joint control over essential employment terms (rather than merely having ‘reserved’ the right to exercise control), and 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 dissent, Members Pearce and McFerran fiercely defended Browning-Ferris (BFI), asserting that the majority “reflexively reverses precedent even though:
- This case should easily be decided without reaching the joint-employer issue at all, by correctly finding that the Respondents are a single employer;
- The adoption of a new joint-employer standard concededly makes no difference to whether the Respondents here are, in fact, joint employers;
- No party in this case has asked the Board to reconsider BFI (and, to the contrary, the parties cite and apply BFI as the applicable standard);
- Breaking with established practice, the Board has failed to give notice that it was considering a change in the law and has failed to provide interested persons with an opportunity to file briefs on the issue; and
- The United States Court of Appeals for the District of Columbia Circuit is currently reviewing BFI.”
The dissent took an obvious swipe at the majority: “[T]o say that the majority is reaching out—and rushing—to reverse BFI is an understatement.”
For employers in potential joint-employment situations, Hy-Brand is welcomed relief. The case may be appealed to the courts, who may or may not overturn it. But if the case ultimately makes it to the current Supreme Court, it is likely to be affirmed.
Arent Fox’s Labor & Employment group will continue to monitor developments in this area. If you have any questions, please contact Michael Stevens, Alexandra Romero, or the Arent Fox professional who usually handles your matters.
Contacts
- Related Practices