NLRB vacates ruling, re-establishing lower standard for joint employer liability

The National Labor Relations Board has overturned its own December decision, returning to a lower standard for establishing joint employer status in complaints involving contractors or franchisees.

In the new order issued Monday, the board vacated its December ruling which had overturned the 2-year-old precedent referred to as the Browning-Ferris standard. Browning-Ferris Industries Chemical Services Inc. is one company involved in the underlying case.

In the now-vacated decision, the board agreed with a Washington, D.C. court's finding that two companies -- Hy-Brand Industrial Contractors Ltd. and Brandt Construction Co. -- were joint employers, but disagreed with the application of the Browning-Ferris standard to arrive at that conclusion.

The order found that Hy-Brand and Brandt were joint employers using the standard followed before Browning-Ferris.

"We find that the Browning-Ferris standard is a distortion of common law as interpreted by the board and the courts, it is contrary to the [National Labor Relations] act, it is ill-advised as a matter of policy, and its application would prevent the board from discharging one of its primary responsibilities under the act, which is to foster stability in labor-management relations," wrote the board in December.

Prior to Browning-Ferris, in order for two companies to be established as joint employers in labor violations cases, both needed to exercise control over an employee's status.

For example, many companies reserve the right to tell a company providing contractors not to send a particular one back in the future.

That previous standard allowed companies to more easily avoid joint status when using contractors or franchisees, even if they reserved the right to affect employment status, so long as they never exercised that right, according to Jason Campbell of Winston & Strawn LLP.

"Lots of companies have agreements in the contractor or franchisee context where they may reserve some rights that have an effect on the employee relationship, but if they never used them it would be clearer to them they were not open to that liability" under the pre-Browning-Ferris standard, said Campbell.

Barely two months after returning to the higher standard, the lower Browning-Ferris one has been re-established, which only requires that such rights be reserved and not necessarily exercised.

"This change made it so that a joint relationship could be found regardless of whether the company exercised the control, even if they had unexercised control reserved that they never really used," Campbell said.

According to Campbell, the renewed Browning-Ferris standard is tougher for employers to parse, and is friendlier to employees seeking to lodge a complaint.

The older standard required the exercising of reserved rights to be deemed joint employers, and therefore it reduced the ways the board could find joint liability.

He also said the return to Browning-Ferris may allow employees to ally with contractors in collective bargaining, despite having separate employers.

"The regular employees and the contractors could together seek to unionize, and be included in the bargaining interest even though they're employed by separate entities with different interests," he said.

"Employers need to watch this closely to see what the board is going to do and what the courts and Congress might do with it," he added.

In the meantime, Campbell said employers will have to check their contractor and franchisee agreements for liability exposure yet again, especially if they were altered after the December decision.

"Short term, to the extent that employers went back and revised franchisee or contractor agreements in light of Hy-Brand, at least today, it looks like you may have to go back and review those again to make sure you're avoiding the joint employer issue under Browning-Ferris," he said.