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March 5, 2018Client Alert

NLRB Vacates Recent Employer-Friendly Joint-Employer Ruling

On February 26, 2018, the National Labor Relations Board (NLRB) unanimously reversed and vacated the employer-friendly Hy-Brand Industrial Contractors, Ltd. (Hy-Brand) decision, which abandoned the previously broad and uncertain test for determining joint employment.

A Brief History: the Browning-Ferris And Hy-Brand Tests 

In December 2017, the NLRB issued the Hy-Brand decision, which restored the requirement that “direct control” was needed for a finding of joint employment. This was a victory for employers seeking to avoid joint liability with other companies.

Prior to Hy-Brand, two or more entities were deemed joint employers so long as the mere potential for control existed. This test grew out of the NRLB’s 2015 pro-employee Browning-Ferris Industries (Browning-Ferris) decision. Under Hy-Brand, a finding of joint-employer status required proof that two entities had jointly exercised direct and immediate control over employment conditions. The potential for control, the previous requirement under Browning-Ferris, no longer was enough.

The reversal comes on the heels of the NLRB Inspector General David Berry (Berry)’s finding that a potential conflict-of-interest had tainted the Hy-Brand decision. On February 9, 2018, Berry issued a report stating that board member Bill Emanuel (Emanuel) improperly participated in the Hy-Brand decision because his former firm, Littler Mendelson PC, had represented one of the clients in Browning-Ferris. Based on Berry’s report, the NLRB determined that Emanuel’s participation in Hy-Brand called in to question the validity of the decision and decided to vacate the recent ruling.

The Current Test: Browning-Ferris

As a result of the NLRB’s decision to vacate the joint-employer standard set forth in Hy-Brand, “the overruling of the board’s decision in Browning-Ferris set forth therein is of no force or effect.” Employers should be prepared, at least for the time being, for the NLRB to rely on the more employee and union-friendly standard articulated in Browning-Ferris. This standard permits the NLRB to find that two or more entities are joint employers if the secondary entity possesses the actual or potential authority to exercise control over the primary entity’s employees, regardless of whether the entity has in fact exercised such authority.

The Likely Return To Hy-Brand

While Browning-Ferris is the current governing standard, we expect that the NLRB likely will use its first opportunity to reinstate the joint-employer standard articulated in Hy-Brand. Additionally, the reversal of Hy-Brand may put more pressure on the Senate to pass the Save the Local Business Act (Act). Passed by the House of Representative in November, the Act would amend the National Labor Relations Act and the Fair Labor Standards Act to establish a Hy-Brand-like direct control standard for joint-employer liability. Many business groups, frustrated with the frequently shifting joint-employer definition, see this as yet another reason for Congress to settle the issue with legislation. We will continue to monitor and provide further updates regarding this issue.

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