NLRB’s Decision to Vacate Joint Employer Ruling Challenged

Allen Smith, J.D. By Allen Smith, J.D. March 13, 2018
NLRB’s Decision to Vacate Joint Employer Ruling Challenged

In a further twist in the saga over how to define "joint employer," the National Labor Relations Board's (NLRB's) February reversal of a December 2017 decision overturning an "indirect control" standard is being challenged, noted Phillip Wilson, president and general counsel of the Labor Relations Institute in Broken Arrow, Okla., at the 2018 Society for Human Resource Management (SHRM) Employment Law & Legislative Conference.

Under the sprawling "indirect control" standard, many entities could be subject to union-organizing campaigns and potential labor disputes where they previously were not because they would be considered the joint employers of unionized workforces they indirectly control.

In 2015, the NLRB changed the definition of how much control a contractor must have over a contracted employer for the two to be joint employers: No longer was direct control needed, as the board for years had said was necessary; indirect or even potential control (e.g., in a contract) would suffice. The board reversed this controversial decision, Browning-Ferris Industries, in a December 2017 decision, Hy-Brand, which revived the direct control standard.

But the NLRB inspector general subsequently found that NLRB member William Emanuel, a Republican, was too closely involved in Hy-Brand to participate in that decision because his former law firm had been a litigant in Browning-Ferris, and the board consequently vacated Hy-Brand on Feb. 26.

Hy-Brand Industrial Contractors, in turn, filed a motion to reconsider on March 9, alleging that the Feb. 26 three-panel decision to vacate the Hy-Brand decision wasn't lawful because Emanuel was excluded from the determination, Wilson noted.

In addition, NLRB member Mark Gaston Pearce, a Democrat, allegedly unlawfully disclosed the three-panel decision at an American Bar Association (ABA) meeting in Puerto Rico the day before it was issued. The NLRB inspector general's investigation also was allegedly unlawfully leaked to senators, including Senate Health, Education, Labor and Pensions Committee Ranking Member Patty Murray, D-Wash., Wilson added. This would arguably constitute a denial of due process. Wilson was at the ABA meeting and said Emanuel was blindsided by the Feb. 26 decision.

Wilson criticized that decision, saying it's never been the requirement for an NLRB member to refrain from participating in a case just because he or she worked for a law firm that represented a party in a case that is being overturned. "It's an absurd extension of the recusal doctrine," he said.

McDonald's Case

The reversal of Hy-Brand raises the question of the status of the McDonald's franchisor-franchisee litigation, noted Frank Cania, SHRM-SCP, also speaking at the conference and president of driven HR, an HR consultancy in Pittsford N.Y.

Under the Obama administration, the NLRB general counsel took the position that McDonald's, the world's largest franchisor, should be considered a joint employer. Had the general counsel prevailed, McDonald's would be liable for any violations of the National Labor Relations Act (NLRA) that a franchisee commits and workers could unionize and bargain with headquarters.

[SHRM members-only HR Q&A: What is the function of the NLRA?]

Wilson noted that under the indirect control standard, McDonald's may have been in for a fight over whether it was a joint employer. But under the direct control standard, settlement was likelier, he said. Now that Browning-Ferris is the law of the land again, McDonald's may again be poised to litigate, according to Wilson.

Appropriations Bill

In one further wrinkle, the House of Representatives may add the Save Local Business Act, a SHRM-supported bill that passed the House last November, to the upcoming omnibus appropriations bill for the Senate to take up. SHRM would support this development, Michael P. Aitken, SHRM vice president of government affairs, said in an interview. Whether there is an omnibus bill by March 23, another continuing resolution or a government shutdown, and whether the Save Local Business Act ultimately passes the Senate, all remain to be seen.


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