HR Management & Compliance

Browning-Ferris reversal calls end to uncertainty on joint employment

Employers confused over what constitutes joint employment have seen the confusion largely cleared up, thanks to a National Labor Relations Board (NLRB) decision issued December 14.

The 3-2 decision overrules the Browning-Ferris decision, which broadened what could be considered a joint employment relationship. Under the Browning-Ferris decision, employers that had indirect—even potential—unexercised control over employees of another employer could be considered joint employers. The party-line decision reinstates the old standard that was used for decades before the 2015 Browning-Ferris decision issued by the Obama-era NLRB.

“I think the most important aspect of the case is that it really ends the uncertainty and unpredictability that Browning-Ferris created because the prior decision never really gave anybody a clear understanding of indirect control,” Burton J. Fishman, an attorney with Fortney & Scott, LLC, in Washington, D.C., and a contributor to Federal Employment Law Insider, said of the new ruling.

The Browning-Ferris decision was especially opposed by employers using employees of temporary staffing agencies and employers working in the franchisor-franchisee business model. This decision is a “terrific victory” for them, Fishman said.

“It creates certainty and predictability,” Fishman said. “I think the business community will value that enormously.”

Ryan J. Funk, an attorney with Faegre Baker Daniels LLP in Indianapolis, Indiana, and a contributor to Indiana Employment Law Letter, agrees the new ruling is a relief to many employers. He said reverting to the old standard helps them in two ways. “The most immediate thing is it provides a clear standard of who is a joint employer,” he said. Employers had a good understanding of the old standard that had been clarified in decades of NLRB decisions, but the Browning-Ferris decision “scrapped that and replaced it with a vague standard.” Now employers as well as unions and employees get the clearer standard back, he said

The second benefit for employers is that under the newly reinstated standard, they are less likely “to be lumped together as a joint employer with other businesses,” Funk said. “As the Board points out here, when an employer is considered a joint employer, it can have new bargaining obligations, liability, and vulnerability to economic protest activity from unions,” he said.

The NLRB’s new decision will have many kinds of employers breathing a sigh of relief, said Funk, calling it “labor law issue No. 1” for many employers lately. “Any employer under the jurisdiction of the NLRB that enters into business relationships with other entities, where those relationships could affect employees, might find relief here,” he said. “Temp agencies, those who use temp agencies, franchisors, and franchisees are prime examples of employers who will probably find relief.”

Effect of new decision

In the announcement of the ruling, the NLRB said that from now on, “two or more entities will be deemed joint employers under the National Labor Relations Act (NLRA) if there is proof that one entity has exercised control over essential employment terms of another entity’s employees (rather than merely having reserved the right to exercise control) and has done so directly and immediately (rather than indirectly) in a manner that is not limited and routine.”

The NLRB statement went on to explain that under the pre-Browning-Ferris standard, which has now been restored, “proof of indirect control, contractually-reserved control that has never been exercised, or control that is limited and routine will not be sufficient to establish a joint-employer relationship.”

Brent Siler, an attorney with Butler Snow LLP in Memphis, Tennessee, and a contributor to Tennessee Employment Law Letter, called the new decision “a big win for employers, especially those who use temporary workers, those who enter into franchise agreements, and those who are affiliated with other business entities.” The 2015 Browning-Ferris decision was controversial because it cast doubt on whether such employers obtained protection from liability under the NLRA.

“The effect of this decision is that the NLRB will be required to show some evidence of direct control over the terms and conditions of an employee’s employment before that business can be subject to the restrictions of the NLRA,” Siler said. “It means that these types of relationships can do what they were intended to do—provide a wall of protection between you and one of your related entity’s labor problems and obligations.”

When the Browning-Ferris decision was decided in 2015, many saw it as a threat to many business arrangements, and the new decision “should help put those fears to rest,” Siler said. “Also, it is important to keep in mind that most federal agencies, such as the Department of Labor and the Equal Employment Opportunity Commission have their own, different rules for determining when a joint employment relationship exists,” he said, explaining that it was possible to be a joint employer under the NLRA but not under Title VII of the Civil Rights Act of 1964. “This decision will get the NLRB back in line with other federal agencies and will hopefully make it easier to predict when a joint employment relationship exists.”

Fishman pointed out an interesting aspect to the case that prompted the reversal of the Browning-Ferris standard: The employers involved, Hy-Brand Industrial Contractors, Ltd., and Brandt Construction Co., were determined to be joint employers in spite of the restored standard and were therefore jointly and severally liable for the unlawful discharges of seven striking employees.

New direction for NLRB

Fishman called the decision overruling Browning-Ferris a harbinger of a reversal in the direction the NLRB took under the Obama administration. “We’re going to see some sweeping changes,” he said.

The joint-employment ruling is one of several 3-2 decisions the NLRB has made in recent days. On December 14, the Board announced it was taking action that may result in the rescission of the controversial “quickie” union election rule implemented during the Obama administration. Also on December 14, the Board issued a decision affecting whether workplace rules, policies, and handbook provisions interfere with employee rights under the NLRA. Those actions followed a decision announced on December 11 reinstating the “reasonableness” settlement standard in single-employer claims.

As of December 16, the NLRB went to four members with the departure of Chairman Philip A. Miscimarra, whose term ended on December 16. The Board now has two Republicans—Marvin E. Kaplan and William J. Emanuel—and two Democrats—Mark Gaston Pearce and Lauren McFerran.

Fishman expects a quick replacement for Miscimarra since the NLRB seems to have the attention of President Donald Trump as well as Congress.

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