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Joint Employer Reversal Changes Rules for Business

Dec. 18, 2017, 4:44 PM

The National Labor Relations Board just rewrote the test for determining whether multiple businesses are joint employers under the National Labor Relations Act. But a few loose ends remain after the board’s 3-2 decision to overrule its 2015 Browning-Ferris Industries ruling.

Lawyers in the NLRB general counsel’s office and elsewhere will be scrambling to gauge how the joint employer ruling will affect the mammoth unfair labor practice case against McDonald’s USA.

The new ruling is good news for McDonald’s USA, LLC and for franchisers and business groups who argued that Browning-Ferris threatened the stability of franchising in the U.S., Jeffrey M. Hirsch, a professor who teaches labor law at the University of North Carolina School of Law and has written about the NLRB, told Bloomberg Law.

Companies must exercise actual and direct and immediate control over the employment conditions of workers in a significant, not merely routine, manner to be classified as a joint employer under the NLRA, the majority of the board said Dec. 14 in Hy-Brand Industrial Contractors Ltd. That reversedBrowning-Ferris, in which a Democrat-majority NLRB said joint employer status could be supported by evidence that a company merely had indirect or potential control over workers who were formally employed by another entity.

In the Hy-Brand decision, the new Republican majority—Chairman Philip A. Miscimarra, Marvin E. Kaplan, and William J. Emanuel—returned to a traditional test of whether companies are joint employers. In doing so, they called the 2-year old Browning-Ferris decision"a distortion of common law.”

No ‘Get Out of Jail Free Card’

Hirsch cautioned, however, that Hy-Brand shouldn’t be considered a “get out of jail free card” for franchised businesses.

In unfair labor practice complaints against McDonald’s, the NLRB’s previous general counsel argued that the company exercised enough control over local franchised restaurants that it could be considered a joint employer even under the test followed by the board before Browning-Ferris. Resolving the legal status of franchisers and franchisees under the NLRA may still require a close look at particular cases and circumstances, the law professor said.

Charles I. Cohen, senior counsel at Morgan Lewis & Bockius in Washington and a former member of the NLRB, told Bloomberg Law all employers need to be vigilant about their relationships with contractors and the employees of contractors. Even under the board’s traditional test, Cohen said, a company can be considered a joint employer if it exercises actual control over another entity’s employees.

Hy-Brand does not give employers a “green light” to control the essential terms of employment for another company’s workers, he said.

NLRB General Counsel Peter B. Robb (R) will now make the decision on whether and how Hy-Brand affects those proceedings and the general counsel’s approach to franchise relationships.

An NLRB spokesperson declined to comment on possible agency action in the Browning-Ferris and McDonald’s cases.

Most Important NLRB Ruling for 2017?

Mark G. Kisicki, a shareholder of Ogletree, Deakins, Nash, Smoak & Stewart P.C. in Phoenix, led a team of lawyers who worked on NLRB NLRBLitiproceedings inBrowning-Ferris.

Kisicki told Bloomberg Law that Browning-Ferris was the NLRB’s most important decision in 2015 and Hy-Brand is clearly the most important of 2017.

Browning-Ferris was extremely broad and provided no guidance to employers on how to determine whether multiple businesses were joint employers, Kisicki said. On the other hand, in Hy-Brand, the lawyer said, the board’s majority did a “fantastic job of explaining why Browning-Ferris was wrong as a matter of law and as a matter of policy.”

Employers “have to be able to understand what our options are,” Kisicki said, and the board has now provided a clear definition of joint employer status. “Our economy grew up” under the legal principles the board has now affirmed, Kisicki said. The Hy-Brand decision marks “a return to normalcy.”

Proskauer partner Michael J. Lebowich in New York, co-head of the law firm’s labor-management relations group, complimented the board on “going out of its way” to analyze both Browning-Ferris and the board’s reasons for returning to the traditional joint employer standard. Lebowich said the majority’s painstaking opinion will allow it to avoid charges that it was “flip-flopping” and puts the NLRB in the “best position it could have” to defend Hy-Brand against any court challenge.

But Naomi Perera, who represents unions and employees at The Kelman Buescher Firm in Denver, called the decision “very disappointing.”

“With the rise of contract company workers who work all but in name for the contracting employer,” the board’s new decision leaves those workers with “no right of redress and no ability to bargain effectively over working conditions,” Perera told Bloomberg Law.

Circuit Court Case Unresolved

One significant piece of unfinished business remains after the NLRB’s action.

The Browning-Ferris case is still being litigated in the U.S. Court of Appeals for the D.C. Circuit. The employer sought court review after the NLRB held it was a joint employer with another company and ordered the joint employer to recognize and bargain with a Teamsters local. The appeal was argued in March, but the court hasn’t issued a decision or expressed any view on the NLRB’s joint employer standards.

Charles I. Cohen, senior counsel at Morgan Lewis & Bockius in Washington and a former member of the NLRB, told Bloomberg Law the NLRB isn’t in control of the court proceeding, but he wouldn’t be surprised if the board or a party asked the court to remand the Browning-Ferris to the agency for further consideration.

Describing the decision as “shocking and brazen” Murray called it “further proof that the Trump Administration will stop at nothing to line the pockets of corporations—no matter what price workers and their families are forced to pay.”

The careful opinion of the board majority showed the joint employer issue was carefully vetted, and the newly appointed members had an adequate opportunity to review the case.

He added that it was almost “universally recognized” that the new board would be looking at Browning-Ferris.

The Dec. 14 case is Hy-Brand Indus. Contractors, Ltd. , 2017 BL 447607, 365 N.L.R.B. No. 156, 12/14/17 .

To contact the reporter on this story: Lawrence E. Dubé in Washington, D.C. at

To contact the editor responsible for this story: Terence Hyland at