Whiplash on the Browning-Ferris Wheel: NLRB Vacates Recent Hy-Brand Decision and Reverts to Obama-Era Joint Employer Standard

If you are experiencing whiplash from the National Labor Relations Board’s wild ride of a year, you are not alone. In a surprising turn of events, on February 26, 2018, the NLRB vacated its decision in Hy-Brand Industrial Contractors, Ltd. and Brandt Construction Co. and reverted to the unpopular Obama-era joint employer standard announced in Browning-Ferris Industries of California, Inc. (BFI). After an inspector general report faulted recent Trump-appointee Board Member William Emanuel for improperly participating in the Hy-Brand decision, the NLRB now returns to a standard that makes it easier for the NLRB to find that two entities are joint employers when considering bargaining obligations and liabilities.

The Brief Reign of the Hy-Brand Joint Employer Standard

On December 14, 2017, during a flurry of decisions issued a few days before former NLRB Chairman Phil Miscimarra’s term expired, the NLRB announced in Hy-Brand that it was overruling the BFI joint employer standard. One of the more controversial Obama-era NLRB decisions, BFI dramatically expanded the joint employer standard beyond requiring actual exercise of direct and immediate control of workers and instead made the mere right to control workers (even if that right was never exercised) sufficient to establish that multiple entities are joint employers. However, in Hy-Brand, the NLRB relaxed the joint employer standard in favor of companies so that both entities must have actually exercised joint control over essential employment terms, the control must have been “direct and immediate,” and the control must not have been “limited and routine.” Hy-Brand also addressed the new joint employer standard’s implications for the franchising industry and ruled that a franchisor’s control of its trademarks should not transform that franchisor into a joint employer.

However, on February 9, 2018, the NLRB Inspector General sent a memo to the NLRB members and stated that Member Emanuel should not have participated in the Hy-Brand decision because of his previous firm’s representation of BFI’s contractor when the BFI case was before the NLRB in 2015. The Inspector General found that the Hy-Brand and the BFI decisions are the same “particular matter involving specific parties” and that Member Emanuel should have been recused. The Inspector General recommended that the Board contact its Designated Agency Ethics Official to determine the appropriate action and to review its recusal issues. Shortly thereafter, the NLRB issued its February 26, 2018, order vacating Hy-Brand and stated that the overruling of the BFI decision is of “no force or effect.”

Now That We’re Back on the Browning-Ferris Wheel…

… we will have to wait to see if the NLRB will revisit the joint employer standard with the recusal of Member Emanuel, or if Congress will step in with legislation to set a standard for joint employer liability. Unfortunately, the NLRB’s back-and-forth regarding the joint employer standard makes it difficult to create stability in business relationships. Therefore, it’s important to remain mindful in your dealings with other entities. Remember that, for now, the mere right to control employment terms (even if that control is not exercised) could lead to a joint employer relationship and establish bargaining obligations and other liabilities under the National Labor Relations Act.

For franchisors and franchisees, the NLRB’s order underscores the importance for the U.S. Senate to act on the bipartisan joint employer bill passed by the House (HR 3441) last November. Franchisors also should continue to identify best practices regarding how they conduct training programs and provide operational field support and related functions like technology, as well as how to address joint employment issues in their franchise agreements and operations manuals.