Yesterday, the National Labor Relations Board (NLRB or Board) issued an Order vacating the Board’s decision in Hy-Brand Industrial Contractors, Ltd. and Brandt Construction Co., 365 NLRB No. 156 (2017), in light of the determination by the Board’s Designated Agency Ethics Official that Member William Emanuel is, and should have been, disqualified from participating in the Hy-Brand proceeding. In Hy-Brand, the NLRB had overruled its joint employer test set forth in Browning-Ferris Industries, 362 NLRB No. 186 (2015),and returned to its pre Browning-Ferris test.

Under the pre Browning-Ferris joint employer test, which the Board had restored in Hy-Brand, two or more entities were deemed joint employers under the National Labor Relations Act (NLRA) if there was 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 did so directly and immediately (rather than indirectly) in a manner that was not limited and routine.

In contrast, under the Browning-Ferris test again in effect, the NLRB finds that two or more entities are joint employers of a single workforce if (1) they are both employers within the meaning of the common law;  and (2) they share or codetermine those matters governing the essential terms and conditions of employment. In evaluating whether an employer possesses sufficient control over employees to qualify as a joint employer, the Board will – among other factors — consider whether an employer has exercised control over terms and conditions of employment indirectly through an intermediary, or whether it has reserved the authority to do so.

As the Hy-Brand Board majority underscored, the breadth and vagueness of such a joint employer test threatens to ensnare a vast range of economic relationships, including:

  • insurance companies that require employers to take certain actions with their employees in order to comply with policy requirements for safety, security, health, etc.
  • franchisors
  • banks or other lenders whose financing terms may require certain performance measurements
  • any company that negotiates specific quality or product requirements
  • any company that grants access to its facilities for a contractor to perform services there, and then regulates the contractor’s access to the property for the duration of the contract
  • any company that is concerned about the quality of contracted services
  • consumers or small businesses who dictate times, manner, and some methods of performance of contractors

Accordingly, companies in or contemplating such relationships should account for this new development.  While it is widely expected that the Trump NLRB will eventually overrule Browning-Ferris, when that may occur is uncertain.