Feb 8, 201812:11 PMOpen Mic
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NLRB pendulum begins to swing back in favor of employers
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In December 2017, the National Labor Relations Board (NLRB or board) and its general counsel were very active in reversing a number of decisions and initiatives issued under the Obama administration. This flurry of activity occurred because NLRB Chairman Philip Miscimarra’s term expired on Dec. 16. The Republican-led NLRB had a 3–2 majority and most of these decisions were issued on a 3–2 basis. The current board is locked in a 2–2 split until the full Senate confirms Miscimarra’s replacement. President Trump has nominated a replacement but it will likely be a few months before the Senate considers that nomination.
This 2–2 deadlock may limit the pace of further reversals; however, in the meantime, we offer the following to help employers digest the December flurry of activity.
Joint employer standard reversed
In Hy-Brand Industrial Contractors, 365 NLRB No. 156, the NLRB explicitly overruled the 2015 Browning-Ferris Industries decision and returned to the joint employer standard that had been followed for decades. In Browning-Ferris, the Board held that a company and its contractors could be deemed a single joint employer even when the two entities have never exercised joint control over essential terms and conditions of employment, and even when any joint control is not “direct and immediate.” The two entities could be found to be joint employers based on the mere existence of “reserved” joint control or based on indirect control that is “limited and routine.”
In its Hy-Brand ruling, the newly Republican-led board stated that a finding of joint employer status requires proof that: 1) the alleged joint employers have actually exercised joint control over essential employment terms; 2) the control is “direct and immediate”; and 3) the control is not “limited and routine.” The board also announced the Hy-Brand joint employer standard would be applied retroactively to all cases in front of it, as well as all pending cases.
This is a significant decision for employers with all sorts of standard business agreements between independent companies, including user-supplier, lessor-lessee, parent-subsidiary, contractor-subcontractor, franchisor-franchisee, and other third party relationships. After Browning-Ferris, many companies had to scrutinize their contracts with third parties to determine whether those contracts provided a risk to the company that would be found to be a joint employer.
Hy-Brand is particularly important for these types of relationships, but especially franchisor-franchisee relationships. Even though franchise law requires some degree of oversight or control by the franchisor over the franchisees, the current NLRB determined it was never the intent of Congress to make franchisors joint employers of their franchisees’ employees. Under Hy-Brand, it is significantly less likely that the typical franchisor-franchisee relationship will result in such entities being considered joint employers.
Interestingly, despite the new Hy-Brand standard, the NLRB majority found that the two companies in this case were joint employers because both had joint control through shared corporate personnel who were directly involved in the termination of seven employees. Both companies exercised this control through a common 401(k) plan, joint mandatory training, and annual meetings to review common employment policies, such as the EEO policy and policies governing workplace conduct. Thus, even though the standard has been revised, employers still need to structure their business relationships carefully to avoid a joint employer finding.
Workplace rules, policies, and handbooks
In another 3–2 decision, the board overruled Lutheran Heritage Village-Livonia in which the board previously had held that facially neutral workplace rules, policies, and handbook provisions unlawfully interfered with rights protected by the NLRA if a facially neutral workplace rule could be “reasonably construed” by an employee to prohibit the exercise of NLRA rights. The reasonably construed test resulted in the invalidation of many facially neutrally handbook provisions and policies, and left many employers wondering whether their policies were valid.
In the Boeing Company, 365 NLRB No. 154, the NLRB established a new test when evaluating facially neutral policies, rules, or handbook provisions. The board stated that when evaluating a facially neutral policy, rule, or handbook provision the test is whether, when reasonably interpreted, the rule would potentially interfere with the exercise of NLRA rights. The board will evaluate two things: 1) the nature and extent of the potential impact on NLRA rights, and 2) legitimate justifications associated with the rule.
The board announced three categories of workplace rules to provide greater clarity and certainty to employers, employees, and unions. Those include:
Category 1 — Rules that are lawful to maintain, either because (i) the rule, when reasonably interpreted, does not prohibit or interfere with the exercise of NLRA rights; or (ii) the potential adverse impact on protected rights is outweighed by justifications associated with the rule. For example, rules requiring employees to abide by basic standards of civility would be a lawful category one rule.
Category 2 — Rules that warrant individualized scrutiny. In each case the board will consider whether the rule in question, when reasonably interpreted, would prohibit or limit any NLRA-protected conduct and whether any associated justifications outweighed any adverse impact on NLRA rights.
Category 3 — Rules that the board would designate as unlawful to maintain because they would prohibit or limit NLRA-protected conduct, without justification sufficient to outweigh that adverse impact on NLRA rights. The board noted an example of a Category 3 rule is a rule that would prohibit employees from discussing wages or benefits with each other.
In applying this new standard, the NLRB majority held Boeing lawfully maintained a no camera rule that prohibited employees from using camera-enabled devices to capture images or video without a valid business need and an approved camera permit. The board held the rule potentially affected the exercise of NLRA rights, but the impact was comparatively slight and outweighed by important justifications, including national security concerns.
This decision is welcome news for employers. The Boeing standard significantly changes the way the board evaluates employer rules, including rules pertaining to conduct in and out of the workplace, such as those involving social media. The new standard will expand the scope and type of rules the board will find lawful, and improve employers’ ability to tailor rules to suit their employees’ needs. Employers’ interest will carry more weight under the new test. Employers may wish to consider a review of policies, procedures, and handbooks because some rules that would have been found unlawful under the Obama board’s previous standard will be considered valid under the new Boeing standard. As with the joint employer standard, the NLRB stated it would apply the new Boeing standard retroactively to all pending cases at every level.