The NEW NLRB: Positive Progress, But One Big Stumble

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New NLRB Leadership

The National Labor Relations Board (NLRB) is under new leadership and has begun returning the nation to a more balanced labor policy.  The NLRB is responsible for enforcing the National Labor Relations Act (NLRA), which governs labor management relations at unionized and non-unionized employers.  Under the new administration, the NLRB has returned to a more moderate path for labor relations issues and begun reversing some pro-union rulings generated during the prior administration.  For example, the NLRB revised its view of “micro units” and reduced its scrutiny of standard employment policies. At the same time, however, the NLRB recently stumbled regarding the joint employment doctrine.

“Micro Units”

Under the prior administration, the NLRB made it easier to unionize small sub-sets of employees within a larger workforce.  Created by the Specialty Healthcare and Rehabilitation Center of Mobile decision, these small groups of employees, known as “micro units,” were allowed to unionize without concern regarding the other employees.  On December 15, 2017, however, the new NLRB reverted to a more long standing precedent, known as the “community of interest” test, to decide whether a larger group of employees, based on their shared working conditions, should vote about unionization, rather than only a smaller sub-set.

Employee Handbooks

Employee handbooks convey important information about the workplace.  Over the past several years, the NLRB had scrutinized many standard handbook provisions using a very subjective standard and invalidated many policies as potentially “chilling” the exercise of NLRA rights.  The new NLRB has reversed course and established a more predictable, less subjective test that focuses on two factors: “(i) the nature and extent of the potential impact on NLRA rights, and (ii) legitimate justifications associated with the rule.”  Under the new analysis, it will be easier for employers to draft and enforce important personnel policies such as “no camera” and “civility” rules.

Joint Employment

Many workforces are comprised of people who work for different employers, such as a temporary employment agency.  A few years ago, the NLRB issued a controversial decision making it easier to combine these employees, who work for different employers, pursuant to the joint employment doctrine.  Under the Browning-Ferris Industries ruling in 2015, joint employment status could be established basically by showing that one employer had indirect or potential control over employees of another employer.  Late last year, the NLRB returned to a more traditional test for joint employment: Whether one employer exercised actual and direct immediate control over the working conditions of the employees of another employer.  Employers welcomed the return to the traditional test, but they were recently surprised when the standard for joint employment abruptly reverted to prior controversial, subjective standard.

On December 14, 2017, the NLRB issued a 3-2 Decision and Order in the matter of Hy-Brand Industrial Contractors, Ltd., 36 NLRB No. 26, 2018 WL 1082557, wherein it overruled Browning-Ferris Industries of California, Inc. d/b/a BFI Newby Island Recyclery, 362 NLRB No. 186 (2015) and re-instituted the pre-Browning-Ferris standard.  Browning-Ferris established a new legal standard for determining whether two employers are joint employers under the NLRA.  Browning-Ferris, 362 NLRB No. 186 at p. 5. Specifically, Browning-Ferris was one of the most controversial rulings of the Obama-era Board, rendering companies potentially liable as joint employers even when they only exhibited indirect control or reserved the ability to exert such control.  Id., at p. 19.

In Hy-Brand, the Board issued a scathing 30 + page order holding that the Browning-Ferris decision “substantially altered [the Board’s] interpretation of joint-employer status across the entire spectrum of private business relationships subject to our jurisdiction,” and noting its “grave concern” that the Browning-Ferris majority “gave insufficient consideration to the ‘potentially massive’ economic implications of its new joint-employer standard.”  Hy-Brand, at p. 35.  The Hy-Brand Board returned to the pre-Browning-Ferris standard for making joint employer determinations, which required proof that an employer actually exercised some “direct and immediate control over the essential employment terms of another company’s employees.”  Id., at page 1.  The Board held:

Thus, a finding of joint-employer status requires proof that the alleged joint-employer entities have actually exercised joint control over essential employment terms (rather than merely having ‘reserved’ the right to exercise control, the control must be ‘direct and immediate’ (rather than indirect), and joint-employer status will not result from control that is ‘limited and routine.’ 

Id., at p. 35.

Following the December Hy-Brand Decision and Order, the Charging Parties in that case filed a motion for “reconsideration, recusal and to strike,” requesting that the NLRB reconsider its Decision. Hy-Brand, 366 NLRB No. 26 Charging Parties sought the recusal of Board Member, and former Littler Mendelson shareholder, Bill Emmanuel. Id. Hy-Brand opposed the motion.  Id. The NLRB General Counsel filed a response to the motion, but took no position on the alleged violation by Bill Emanuel. Id.

On February 9, the NLRB Inspector General, David Berry, issued a report concerning Board Member Emanuel’s participation in the Hy-Brand Decision and Order.  (See Hy-Brand, 366 NLRB No. 26, 2018 WL 1082557 (Feb. 26, 2018), at n. 1 (citing “OIG Report Regarding Hy-Brand Deliberations,” available at www.nlrb.gov)).  The Inspector General opined that Board Member Emanuel should not have participated in the December Hy-Brand decision because the Littler Mendelson firm, of which he previously was a shareholder, represented Browning-Ferris’s contractor, Leadpoint Business Services, Inc., before the Board.  Id.

On February 26, 2018, a three-member panel of the NLRB issued a short, one page Order, unanimously vacating and setting aside the Board’s Hy-Brand Decision and Order in a 3-0 vote. Hy-Brand, 366 NLRB No. 26. In making its ruling, the Board held, “The Board’s Designated Agency Ethics Official has determined that Member Emanuel is, and should have been, disqualified from participating in this proceeding.”  Id.  As a result of the vacatur, the Board held that the prior December overruling of the Browning-Ferris decision was of no force and effect, thereby re-implementing the Browning-Ferris standard as controlling.  Id.

On Friday, March 9, in their Motion for Reconsideration, Hy-Brand asked the NLRB to reconsider the February panel decision, arguing that Board Member Emanuel, as part of the full body, should have been allowed to vote on whether to let the three-board panel rule on behalf of the full board.  In its brief, Hy-Brand also argued that the Inspector General’s report “fails first year law school scrutiny.”  See Resp. Motion for Reconsideration, p. 7.

As a result of the above legal developments, the current state of play is that the Browning-Ferris “indirect control” standard is back in effect, much to the chagrin of employers. The NLRB will likely revisit the issue through another case, but in the meantime, employers should be very careful about exerting indirect or direct control over temp employees.

Conclusion

From a labor law perspective, expect the positive shift in national labor policy begun in 2017 to continue this year.  Changes will likely be gradual, and more legal stumbles may occur.  Nevertheless, through NLRB decisions, new regulations, or legislation, employees and employers should benefit from more balanced labor and employment laws.

For more than 30 years, William Floyd has practiced labor and employment law, representing employers of all sizes.  Mr. Floyd is a Certified Labor and Employment Law Specialist and Member of Nexsen Pruet, LLC and can be contacted at wfloyd@maynardnexsen.com. 

Nikole Setzler Mergo has been a litigator with Nexsen Pruet for 20 years, defending her North and South Carolina clients in employment and business litigation across the country. She provides daily employment law advice and counsel on all aspects of employment law and speaks nationally on key topics.  She can be reached at nmergo@maynardnexsen.com.