NLRB Overturns Joint Employer Rule

According to Richard Alaniz, a partner at Cruickshank & Alaniz, a labor and employment firm, there are many open questions as a result of the decision, which could affect car rental franchises.

Photo via National Labor Relations Board/Wikimedia. 
Photo via National Labor Relations Board/Wikimedia.

It seems that in recent weeks, members of Congress, the National Labor Relations Board (NLRB), many employers, and unions in general have been focused on the issue of “joint employment.” Concern over joint employees began in 2015 with the NLRB’s decision in the Browning-Ferris case. There, an NLRB dominated by Obama appointees — in an effort to help unions in organizing as well as to expand the parties liable for labor law violations — changed a rule that had been in place for over 30 years.

They held that if an employer had “indirect contact,” as opposed to “direct control” over employment and related matters of another employer’s employees, it would be considered a joint employment relationship. The decision had major implications for franchisors/franchisees (such as auto rental franchises), staffing companies and most employers. Numerous employers, including McDonalds, were confronted with claims of joint employment with at least some of their franchisees.

With the election of President Trump, the majority of the NLRB switched to Republican. On Dec.14, 2017 the board, in Hy-Brand Industrial Contractors, Ltd. overruled Browning-Ferris and returned to the “direct control” standard for a finding of joint employer.

This reversal back to the old standard drew immediate fire from unions and their supporters, especially in Congress. They focused on the fact that new board member William Emanuel’s former management-side labor firm had represented one of the employers in the Browning-Ferris case. This created a conflict of interest that should have required his recusal from participating in the decision in Hy-Brand.

The board’s inspector general concluded that Emanuel should have recused himself. Due to the pressure from several Democratic senators and unions, the board on Feb. 26, decided to vacate its December decision in Hy-Brand. This effectively returns the standard to the “indirect control” test adopted in Browning-Ferris.

The decision to revert to the former rule has caused Congress to consider the “Save Local Business Act” H.R.3441(115) which would undo the Browning-Ferris decision. The bill has already passed the House.

The decision also created a dilemma for the board’s general counsel Peter Robb. He had recently halted the joint employer case against McDonald’s that was nearing an end. There are many open questions as a result of the decision. We will have to wait to see how they are resolved.       

This analysis is provided by Richard D. Alaniz, a partner at Cruickshank & Alaniz, a labor and employment firm based in Houston. Alaniz has been at the forefront of labor and employment law for over 30 years, including stints with the U.S. Department of Labor and the National Labor Relations Board. He can be reached at (281) 381-2219 or [email protected].

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