As the composition of the National Labor Relations Board (the "Board") shifts due to vacancies that have been filled by the new Presidential administration, there has been a noticeable trend towards more employer-friendly rulings from the Board. On December 14, 2017, this trend continued when the Board expressly overruled its August 27, 2015 decision in Browning-Ferris Industries of California, Inc. d/b/a BFI Newby Island Recyclery, 362 NLRB 186 (2015), which had established a new standard for determining joint employer status. In overruling Browning-Ferris, the Board stated that it was returning to the joint employer standard that had been in place for nearly thirty (30) years before the Browning-Ferris decision.
In Hy-Brand Industrial Contractors, Ltd., 365 NLRB 156 (2017), the Board addressed the question of whether two companies (Hy-Brand Industrial Contractors, Ltd. ("Hy-Brand") and Brandt Construction Co. ("Brandt")) were joint employers for purposes of the National Labor Relations Act ("NLRA"). By way of background, Hy-Brand is a construction company based out of Muscatine, Iowa, which erects steel warehouses and other structures. Brandt is based out of Milan, Illinois, and is also a construction company that provides asphalt and concrete services. The two companies are commonly owned by four members of the Brandt family (Charles Brandt and his three sons). The employees of Hy-Brand and Brandt are subject to identical workplace rules and policies, receive identical employment related benefits, and the hiring and firing decisions for both companies are made by the same individual, Terrence Brandt, who serves as Vice-President of both Hy-Brand and Brandt.
The dispute arose when five Hy-Brand employees and two Brandt employees were terminated after engaging in work stoppages based on concerns they had with the terms of their employment. In earlier proceedings, an Administrative Law Judge ("ALJ") found that the termination of these employees constituted unlawful interference with the employees’ rights in violation of the NLRA. Applying the joint employer standard set forth in Browning-Ferris, the ALJ further found that Hy-Brand and Brandt were joint employers and thus jointly and severally liable for the applicable violations. Hy-Brand and Brandt challenged the ALJ’s findings, including the finding that they were joint employers.
The Board opened its opinion by declaring that the Browning-Ferris standard, which had been applied by the ALJ, is a distortion of the common law and contrary to the NLRA and was therefore overruled. In order to appreciate the importance of the Board’s decision to overrule Browning-Ferris, it is necessary to understand how the Browning-Ferris decision altered the long-standing rules governing joint-employer status and the implications of those changes. Under Browning-Ferris, an employer could be a joint employer of employees "based solely on a never-exercised right to exercise ‘indirect’ control over … an ‘essential’ employment term …." In other words, joint employer status could be triggered if a company contractually reserved the right to control certain "essential" terms of employment, even if that company never exercised control over such terms. As the Board explained, the expansion of the joint-employer standard in Browning-Ferris "subjected countless entities to unprecedented new joint bargaining obligations that most may not even know they have, to potential liability for unfair labor practices and breaches of collective-bargaining agreements, and to economic protest activity, including what have heretofore been unlawful secondary strikes, boycotts, and picketing."
The difficulty with the Browning-Ferris standard was the uncertainty as to what level of "reserved" or "indirect" control was sufficient to subject a company to joint employment obligations. Fortunately for employers, in Hy-Brand Industrial, the Board returned to the standard under which joint employer status is based on the extent to which the company has actually exercised control over the terms of employment in a direct and immediate way.
The Board’s decision in Hy-Brand Industrial is likely a welcomed change for employers. However, the ruling also illustrates that even under the more employer-friendly pre-Browning-Ferris standard, employers need to be cognizant of the potential for a finding of joint employer status. Although Hy-Brand and Brandt were successful in arguing that Browning-Ferris should be overruled, the Board nonetheless found that both of the companies had in fact exercised direct and immediate control over material terms of employment. Therefore, the Board found that Hy-Brand and Brandt were joint employers and had joint and several liability for the unfair labor practice of terminating the employees for engaging in work stoppages.
It is important to note that Hy-Brand Industrial is an NLRB administrative ruling, and thus does not bind non-parties. Nonetheless, the decision to overrule Browning-Ferris eliminates a large amount of uncertainty for employers who use independent contractors, outsource work, or utilize staffing agencies. Despite the generally favorable change for employers, the Hy-Brand Industrial ruling also demonstrates that even under a more favorable standard, companies would be wise to review their current workforce arrangements for potential joint-employer exposure. The attorneys in Koley Jessen’s Employment, Labor and Benefits Practice group are available to further discuss the Hy-Brand Industrial ruling as well as other recent NLRB decisions.