On February 26, 2018, the National Labor Relations Board (“NLRB”) issued an Order vacating its decision in Hy-Brand Industrial Contractors, Ltd. and Brandt Construction Co., 365 NLRB No. 156 (2017) (“Hy-Brand”).  The decision to vacate the Hy-Brand ruling came on the heels of the determination by the NLRB’s Designated Agency Ethics Official with the Office of the Inspector General that NLRB Member William Emanuel is, and should have been, disqualified from participating in the Hy-Band proceeding. 

What did Hy-Brand do?

In Hy-Brand, the NLRB overturned the highly controversial joint employer test enunciated in Browning-Ferris Industries and returned to the Board’s pre-Browning-Ferris standard. With Hy-Brandvacated, the Browning-Ferris standard is again the law of the land. Under Browning-Ferris, two or more entities are “joint employers” of a single workforce if (1) they are both employers within the meaning of the common law; and (2) they share or co-determine those matters governing the essential terms and conditions of the employment. This causes significant problems for the industry.

By contrast, under Browning-Ferris, two or more entities are “joint employers” of a single workforce if (1) they are both employers within the meaning of the common law; and (2) they share or co-determine those matters governing the essential terms and conditions of the employment.  When evaluating whether an employer possesses adequate control over the employees to qualify as a joint employer, the Browning-Ferris ruling requires that the NLRB consider, among other factors, whether an employer exercised control over the terms and conditions of employment indirectly through an intermediary, or whether it reserved the authority to do so.  Reservation of the authority to control the workforce was, under Browning-Ferris, enough to result in a joint employer finding by the NLRB.

Why did Browning-Ferris cause problems?

The twenty-first century workforce is significantly different than in decades past.  Because Browning-Ferris required only “indirect control” and/or “contractually reserved control” by one employer over the employees of another to meet the joint employer standard, companies were faced with being defined as “employers” of individuals with whom they had little, if any, direct contact.  The practical impact of Browning-Ferris was to expand the ability of unions to demand that employers engage in collective bargaining.  An employer with no union, having been found under the Browning-Ferrisstandard to be participating in a joint employer relationship with a unionized employer, could suddenly be thrust into a bargaining obligation.  Browning-Ferris received criticism, from both union and union-free businesses, for its failure to produce predictable results and fundamentally altered the landscape for a number of business relationships, such as user-supplier, contractor-subcontractor, franchisor-franchisee, parent-subsidiary, predecessor-successor, lessor-lessee, and creditor-debtor.   

Why did the NLRB Vacate Hy-Brand?

The Office of the Inspector General issued a Memorandum on February 9, 2018, finding that, because NLRB Member William Emanuel’s former law firm represented a litigant, Leadpoint, in the Browning-Ferris case, Member Emanuel should have recused himself from the Hy-Brand decision which the Office of Inspector General characterized as a “do-over” of Browning-Ferris.   Emanuel had been a longtime partner at Littler Mendelson.  The Office of Inspector General wrote that Emanuel’s participation in the Hy-Brand decision “when he otherwise should have been recused exposes a serious and flagrant problem and/or deficiency” in the Board’s processes. 

Based upon the recommendation from the Office of Inspector General, the NLRB issued an Order vacating the Hy-Brand decision, pending further proceedings before the Board.  

What is Next?

Hy-Brand’s decision was a 3-2 ruling from December 14, 2017, with Republican Members Philip A. Miscimarra, Marvin E. Kaplan and Emanuel siding in favor of overturning Browning-Ferris.    Although only a few short months ago, much has changed in the interim.  First, Miscimarra’s term has ended, effective December 16, 2017.  His seat is currently vacant.  President Trump has nominated John Ring, a former Partner with the law firm of Morgan Lewis in Washington, D.C. to fill Miscimarra’s seat.  That nomination is being processed and awaiting confirmation.  It could take months for the nomination to be confirmed. 

Presently, the NLRB is comprised of only three (3) members that can rule upon the Hy-Brand issue, Democratic Members Mark Gaston Pearce and Lauren McFerran, along with Republican Member Kaplan.  Members Pearce and McFerran dissented in Hy-Brand originally in December 2017 and there is no reason to believe that their positions will change on this issue.  This means a vote of the current board would likely uphold the Browning-Ferris standard.  Furthermore, even assuming that Mr. Ring is confirmed as the newest member of the NLRB, his presumed vote in favor of overturning Browning-Ferris would merely result in a 2-2 split due to Emanuel’s recusal from future decisions on the issue.

The next appointment to the NLRB will take place when Pearce’s term expires on August 27, 2018.  If tradition is maintained, the vacancy will be filled by a Democrat who, presumably, will endorse Browning-Ferris.  If this holds true, there will be no deviation from Browning-Ferris in the near future, meaning that companies will be left to navigate the treacherous waters of the Browning-Ferris joint employer standard.  Some are now calling for a legislative fix to the joint employer standard. 

The bottom line is that the Board’s decision to vacate Hy-Brand will have substantial repercussions for businesses into the foreseeable future.