Labor Board Scraps Controversial Joint Employer Decision (Updated)

The National Labor Relations Board is taking a redo on its controversial decision to limit joint employer liability for affiliated businesses, thanks to ethics questions surrounding Member William Emanuel’s (R) participation in the case.

The board announced Feb. 26 that it has vacated its decision in Hy-Brand Industrial Contractors. A Republican-majority NLRB in December used the Hy-Brand case to scrap an expansive Obama-era legal test that made it easier to tag affiliated businesses as joint employers. It overturned a previous decision in Browning-Ferris Industries, a case then pending before a federal appeals court that Emanuel’s former law firm participated in.

The board in a 3-0 decision that didn’t include Emanuel said the move opens the Hy-Brand case up for additional proceedings. It did not say, however, whether Emanuel would be permitted to participate in the case.

NLRB Inspector General David Berry earlier this month issued a report finding that Emanuel shouldn’t have participated in the Hy-Brand case. That’s because the case was pushed through to decision in a way that tied it directly to the Browning-Ferris case, Berry said.

“This was one of the most important issues that this board was going to deal with and everyone knew that his firm was involved,” former NLRB member Sharon Block told Bloomberg Law of Emanuel’s participation in the case. The board “broke precedent in dealing with an issue of this magnitude” by taking up the joint employment question in a case in which it could have been avoided, Block added.

Berry’s report and what may be a second look at Emanuel’s potential conflict of interest called into question whether the Hy-Brand decision still controls the joint employer question. Although labor unions and worker advocates want to revert to the wider Browning-Ferris standard of joint employer liability, the best they can likely do is try to delay the board from scrapping that standard with a new ruling in Hy-Brand or another case.

The Hy-Brand workers, who said the company fired them for striking, asked the NLRB to reconsider the decision, and a Teamsters local is trying to intervene in the case. The same union has also asked an appeals court in Washington to reconsider its decision to send the Browning-Ferris case back to the board without deciding on it.

“If this does get reconsidered, I think it’s a signal to people who support Browning-Ferris to try to play keep-away for awhile,” James Faul, who represents the workers in the Hy-Brand case, told Bloomberg Law before the board issued the latest decision.

Berry’s report focuses on the deliberative process the board used to decide Hy-Brand. The inspector general didn’t necessarily suggest that Emanuel should sit out any joint employment case or that the board couldn’t reconsider Hy-Brand and reach the same decision.

An NLRB spokeswoman declined to comment.

Michael Avakian, who represents Hy-Brand in the litigation, told Bloomberg Law he’s “disappointed” by the decision because it leave the case in limbo. “They deserve a full five member board decision on the joint employer issue,” Avakian said.

Supersize Debate

The joint employer debate has been closely watched because of its potential impact for a wide range of workers and businesses in franchise, staffing, and other contract relationships.

The expanded joint employer test—established in 2015 by a Democratic majority board—was at the center of high-profile litigation against McDonald’s Corp. alleging that the fast-food giant is liable for alleged unfair labor practices by franchisee restaurant owners. The NLRB’s general counsel’s office has been in settlement talks with McDonald’s since the Hy-Brand decision.

“If you’re a small business, you’ve already been confused by the constant ping-ponging back and forth on this issue over the years,” Matt Haller, a vice president for the International Franchise Association, told Bloomberg Law. “I think for us it’s an opportunity to push for legislation.”

The IFA has been leading the charge in favor of a bill that would adopt a more restricted standard for joint employment under federal labor and wage-and-hour laws. The Senate has yet to take up the measure since it was passed in the House last year. That’s likely because the largely Republican-backed measure would need the support of at least nine Democrats to get the 60 votes needed to avoid a filibuster.

The five-member NLRB is currently locked in a 2-2 partisan split as management attorney John Ring (R) awaits a confirmation hearing later this week.
That means it’s up to the board to resolve the issue.

House Education and the Workforce Committee Chairwoman Virginia Foxx (R-N.C.) said the Obama board “radically redefined” the joint employer standard in the Browning-Ferris case. “Once John Ring is confirmed by the Senate to serve on the NLRB, we are confident that the Board will continue to work diligently to undo the radical policies imposed by the Obama-era Board,” Foxx said in a statement.

The Road Ahead

A pair of former NLRB officials speaking on condition of anonymity said a Republican-controlled board could decide to reconsider Hy-Brand or resolve the joint employer question in another case. They said Hy-Brand isn’t the ideal case to resolve the issue because an administrative law judge hearing the case first ruled that the company was liable under a separate “single-employer” theory before getting to its joint employer status with another contractor.

Meanwhile, Democrats in Congress say the board violated the Administrative Act by overturning Browning-Ferris without adequate deliberation. An NLRB ethics official is also slated to weigh in.

Berry said former NLRB Chairman Phil Miscimarra “marshaled” the case through the deliberative process in a way that intertwined it with Browning-Ferris, according to Berry. He pointed to an email from Miscimarra to Emanuel and member Marvin Kaplan in which Miscimarra urged them to adopt his draft opinion in Hy-Brand with minimal or no tinkering and highlighted that the purpose of the decision was to undo Browning-Ferris. Emanuel should have sat the case out because it was so closely tied to Browning-Ferris, Berry said.

But neither the Berry report or the allegations of foul play seem to stop the board from changing the standard in another case.

“The inspector general report seems to give the board a little bit of wiggle room,” one former NLRB official told Bloomberg Law. “They may be able to do what they want to do as long as they do it properly, with full de novo review of the case that they choose.”

The case is Hy-Brand Industrial Contractors, Ltd., 2018 BL 63201, N.L.R.B., No. 26, 2/26/18.