The National Labor Relations Board (NLRB) yesterday overruled Browning-Ferris Industries of California, Inc., an Obama-era decision that expanded the doctrine of joint employment under the National Labor Relations Act (NLRA). In Hy-Brand Industrial Contractors, Ltd., and Brandt Construction, Co., the Board rolled back the expansion of joint employer liability and returned to the long-standing direct control standard for determining joint employer status. A return to this standard means that employers that exercised no "direct and immediate control" over employees' essential employment terms and conditions will not be liable as a joint employer for labor law violations committed by a partner employer.

In Hy-Brand, the NLRB affirmed an administrative law judge's finding that Hy-Brand and Brandt Construction were joint employers and jointly liable for unfair labor practices, but rejected that court's application of the Browning-Ferris standard in finding joint-employer status. Browning-Ferris reversed long-standing precedent and held that an entity could be considered a joint employer even if it never actually exercised any control over the employee.

Under Browning-Ferris, mere authority to exercise indirect control was sufficient to result in a joint employer relationship. Browning-Ferris was a significant departure from prior NLRB precedent that required direct and immediate control to find a joint-employer relationship. The Board's decision in Hy-Brand is consistent with Board Chairman Philip Miscimarra's dissent in Browning-Ferris.

Hy-Brand articulates five primary reasons for overruling Browning-Ferris, noting that it:

  • exceeded statutory authority by expanding the coverage of the NLRA;
  • overreached by changing the Congressionally limited definition of "employer";
  • modified the agency standard in a way that only Congress may;
  • caused confusion and instability in labor relations by abandoning long-standing precedent; and
  • was an incorrect remedy to an incorrectly identified issue regarding bargaining inequality.

Under Hy-Brand, "a finding of joint-employer status shall once again require proof that putative joint employer entities have exercised joint control over essential employment terms (rather than merely having reserved the right to exercise control), the control must be direct and immediate (rather than indirect), and joint-employer status will not result from control that is limited and routine."

The Hy-Brand decision does administratively what Congress intended to do legislatively with the Save Local Business Act, H.R. 3441. If Congress passes H.R. 3441, it will codify the Hy-Brand decision. Passage of the Save Local Business Act would prevent any future Board-initiated policy change that might result from a future change in Board composition. See our November 13, 2017, alert for more information on this pending legislation.

Ballard Spahr's Labor and Employment Group monitors changes in law and policy of the National Labor Relations Board and routinely assists clients in navigating and preparing for compliance with new labor decisions and policy.

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