The joint employer standard, which is used to determine the extent to which one employer may become liable for obligations of another, has long been a very politically-charged issue. It therefore comes as no surprise that less than one year into the Trump administration, the National Labor Relations Board (“NLRB”) has issued a ruling that in effect reverses a controversial decision of the Obama Board that made it easier to prove the existence of a “joint employer” relationship. In a 3-2 ruling, the NLRB overruled the Board’s 2015 decision in Browning-Ferris Industries, 362 NLRB No. 186 (2015) (“Browning-Ferris”), and returned to the pre–Browning Ferris standard that governed joint employer liability.
Browning-Ferris caused employers great concern because it broadened the standard for proving joint employer status. Under this decision, “indirect control” and/or “contractually reserved control” by one employer over the employees of another employer was sufficient. The practical impact of this broader standard was to expand unions’ ability to demand that employers engage in collective bargaining. An employer with no union, having been found under the broader “Browning-Ferris” standard to be participating in a “joint employer” relationship with a unionized employer, could suddenly and unexpectedly be confronted with a bargaining obligation. Consequently, Browning-Ferris received widespread criticism from both unionized and union-free businesses, as the Browning-Ferris test proved unpredictable and fundamentally altered the law applicable to a number of business relationships including: user-supplier, contractor-subcontractor, franchisor-franchisee, parent-subsidiary, predecessor-successor, lessor-lessee, and creditor-debtor.
In Hy-Brand Industrial Contractors Ltd., 365 No. 156 (December 14, 2017) (“Hy-Brand”), the NLRB returned to the pre-Browning-Ferris standard whereby “a joint employer” relationship must be proven by showing that one employer exercises control over essential employment terms governing another employer’s employees. The Board explained that “essential employment terms” includes things such as the right to hire, discharge, discipline, supervise, and direct employees of the other employer. An employer may be considered a joint employer in relation to another employer’s employees only if the employer “directly and immediately” exercises significant control over the essential terms and conditions of employment. Moreover, due to the majority’s belief that the decision is critical to stability in the labor arena, the majority wrote that it will be applied to all pending NLRB cases involving joint employer questions of law.
Returning to the pre-Browning-Ferris standard is welcome news for businesses that rely on contractors. This is particularly true for employers in the energy industry who rely upon independent contractors as part of their day-to-day operations. Employers cannot assume, however, that this renewed standard of joint control means that a finding of joint employment will never occur. The Board did not suggest that it was doing away with or watering down the pre-Browning-Ferris standard. Thus, joint employer issues will continue to exist and employers must consciously and deliberately avoid the trap of exerting immediate and direct control over employees of other employers.