NLRB Overturns Obama-Era Joint Employer Rules

In a controversial 2015 decision, a 3-2 Democratic majority NLRB ruled that indirect or even potential control over a subcontractor’s employees might lead to a joint employment relationship.  That case, Browning-Ferris, was of great concern to contractors, franchisors, and others who might be found jointly liable with another entity for that entity’s employment or labor law violations.  On December 14, 2017, the new NLRB majority overruled the Browning-Ferris decision, and returned to the pre-Browning-Ferris standard for making joint employer determinations.  The traditional standard generally required proof that a company actually exercised some "direct and immediate control" over the essential employment terms of another company’s employees.  Hy-Brand Industrial Contractors, 365 NLRB No. 156 (2017).  The new NLRB majority explained that evidence of indirect control or contractually-reserved (but never exercised) authority is probative of joint-employer status only to the extent that it supplements and reinforces evidence of direct control.  The majority concluded that its restored pre-Browning-Ferris standard adheres to the common law and is supported by the Labor Act’s policy of promoting stability and predictability in bargaining relationships.

One company undoubtedly particularly happy about the new NLRB ruling is McDonald’s, as the NLRB’s previous General Counsel issued a complaint arguing that the company exercised enough control over local franchise restaurants that it could be considered a joint employer.  Nevertheless, even under the new Board ruling confirming the traditional test, the company can still be considered a joint employer if it exercises actual control over another entity’s employees.