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Republican-Controlled NLRB Reverses Obama-Era Rulings

In several recent 3-2 decisions, the Republican-controlled National Labor Relations Board (NLRB) reversed several Obama-era decisions and policies, permitting franchisors, other corporations such as McDonald’s, and staffing agencies to breathe a collective sigh of relief.

In a much-anticipated ruling, the NLRB overturned the test, established in 2015, for determining when a company and its franchisees or contractors can be held to be a single joint employer and thus liable for decisions on hiring, firing, and retaliation against employees who were exercising rights that are protected by the National Labor Relations Act (NLRA). Under the 2015 Browning-Ferris decision, the NLRB determined that two businesses can be joint employers, and both responsible for decisions by the other, when one has “indirect” or “reserved” control over the other’s workers. Under Browning-Ferris, an employer could be considered a joint employer of another company’s employees if the possible joint employer reserved the right to exercise control over the other’s employees, there was an agreement to supply employees to another that specified a maximum total amount of reimbursable labor costs, or supervision of another company’s employees was limited and routine to giving instructions as to indicating what work to perform and where and when to perform, but not how to perform. The standard permitted the NLRB and the courts to hold businesses accountable for the wrongdoing of their contractors and subcontractors.

All of that has changed under the new ruling. In order to be held a joint employer, a company must exercise direct and immediate control over essential employment terms, including wages, hours, and working conditions. For example, a finding of joint employer status will not result from supervision that was limited and routine.

Congress is considering legislation to make permanent the NLRB’s ruling. The pending legislation would provide that a business can be considered a joint employer only if it exercises direct, actual, and immediate significant control over the essential working conditions of employees.

In another significant case, the NLRB overruled a prior ruling that had established a test for determining when work rules, policies, and handbook provisions would be considered to interfere with employee rights to engage in protected concerted activity. Since 2004, the NLRB had considered unlawful a workplace rule that explicitly restricted rights protected by the NLRA. In addition, a rule or policy was determined by the NLRB to be in violation of the NLRA if “(1) employees would reasonably construe the language to prohibit [protected] activity; (2) . . . was promulgated in response to union activity; or (3) . . . was applied to restrict the exercise of [the right to engage in concerted activity regarding wages, hours, and other terms and conditions of employment].”

However, the NLRB recently found that a company’s policy restricting the use of camera-enabled cell phones on its property does not explicitly restrict protected activity and was not adopted in response to protected activity. The NLRB concluded that the rule was not unlawful. Throwing out the old test, the NLRB stated that it will evaluate facially neutral policies by balancing the potential impact of the rule on rights protected by the NLRA, against the legitimate justification for the rule or policy. The NLRB’s new balancing policy will consider three categories of rules or policies: (1) those rules that the NLRB considers lawful to maintain, because on their face they do not interfere with protected rights, or the potential interference is outweighed by justifications, including rules “requiring employees to abide by basic standards of civility”; (2) rules that require individual scrutiny to determine the balance between interference and legitimate justification; and (3) rules that clearly interfere with or prohibit protected activity, such as rules that prohibit employees from discussing with each other wages or benefits or other working conditions.

This new test is likely to result in as much litigation as the old one and will affect most employers, whether or not they are unionized, because the NLRB in recent years has expanded its reach by finding that nonunionized employees are entitled to the same rights to engage in protected concerted activities as are unionized employees.

Hinckley Allen’s labor and employment attorneys can help you navigate and address the issues raised by these new and important NLRB rulings.