Back to the Future with the NLRB

By Christine S. Coleman - McMahon Berger, P.C.

September 14, 2018

Prior to August 2015, it was well settled under the National Labor Relations Act (NLRA) that two employers would be considered joint-employers only if they each possessed and exercised direct control over the workforce. Under the law as it was, PEOs (Professional Employer Organizations), staffing agencies, parent companies, and franchisors had a reasonable idea whether they would be obligated to participate in collective bargaining with employees of the subsidiary/franchisee.

In August 2015, the NLRB issued the Browning-Ferris Industries decision which upended the joint-employer standard. Under the Browning-Ferris standard, an entity could be considered a joint employer not only if it exercised direct control of employees’ activities, but also if it had “indirect” or even “potential” control. Then, in December 2017, the National Labor Relations Board (NLRB) announced that it overruled Browning-Ferris Industries with its decision in Hy-Brand Industrial Contractors, Ltd and Brandt Construction Co.; however, that ruling was vacated in February 2018 after ethical concerns arose regarding an NLRB member’s ties to the attorneys representing one of the parties.

On September 14th, the NLRB proposed a new regulation updating the joint employer standard. Under the proposed rule, two or more entities would be deemed joint employers only if it could be demonstrated that the entities exercised control over essential employment terms of another entity’s employees and did so directly and immediately in a manner that is not limited and routine. Indirect influence and contractual reservations of authority would no longer be sufficient to establish a joint-employer relationship. See the rule at: https://www.federalregister.gov/documents/2018/09/14/2018-19930/the-standard-for-determining-joint-employer-status

The proposed rule is expected to be welcomed by employers. Since 2015, there has been much confusion and concern over whether a franchisor or parent company, for example, would be considered a joint-employer with its respective franchisee/subsidiary by the NLRB. One company that has experienced all the ups and downs of the Browning-Ferris decision is McDonald’s. In 2014, McDonald’s was named by the NLRB as a joint-employer with a franchisee in California that allegedly committed labor violations. McDonald’s denied that it was a joint-employer, but after the Browning-Ferris decision in 2015, it faced an uphill battle and had to engage in years of costly litigation. When the NLRB announced its decision in Hy-Brand Industrial Contractors, Ltd and Brandt Construction Co. overruling Browning-Ferris, it seemed there may be a way to amicably resolve the case; but then, that decision was overturned. In March 2018, McDonald’s finally agreed to pay $3.75 million to settle the case without admitting wrongdoing.

The proposed rule is meant to “foster predictability, consistency and stability” in the determination of joint-employer status – clearly something that has been lacking since 2015. In support of the proposed rule, the NLRB said that the NLRA’s intent would “best be supported by a joint-employer doctrine that does not draw third parties who have not played an active role in deciding wages, benefits, or other essential terms and conditions of employment into a collective bargaining relationship for another employer’s employees.”

Comments on the rule are due 60 days from the scheduled date of publication, September 14, 2018.

The St. Louis employment attorneys at McMahon Berger have been representing employers across the country in labor and employment matters for over sixty years, and are available to discuss these issues and others. As always, the foregoing is for informational purposes only and does not constitute legal advice regarding any particular situation as every situation must be evaluated on its own facts. The choice of a lawyer is an important decision and should not be based solely on advertisements.