The National Labor Relations Board issued two decisions of major interest to employers on December 14, 2017 – (1) adopting a new, more balanced test for evaluating whether workplace rules infringe upon employees’ rights under the National Labor Relations Act and (2) overturning the broad standard for determining joint employer status and returning to the prior, more practical standard.
The New Employee Handbook Standard
In the 2004 case of Lutheran Heritage Village-Livonia, 343 NLRB 646, the Board held that facially neutral workplace rules violate the NLRA if they could be “reasonably construed” by employees to prohibit the exercise of their protected rights. This was the case even if the workplace rules did not explicitly prohibit the exercise of protected rights, were not implemented in response to such activity, and were not applied in a manner that infringed upon those rights. Thus, the Lutheran Heritage standard clearly favored employees.
Finding, since Lutheran Heritage, however, that it “far too often failed to give adequate consideration and weight to employer interests in its analysis of work rules,” the Board has now articulated a new “balancing” test in The Boeing Co., 365 NLRB No. 154. Under this new standard, when evaluating facially neutral policies that could be reasonably interpreted to interfere with employees’ protected rights, the Board will evaluate two things: (i) the nature and extent of the potential impact on NLRA rights, and (ii) legitimate justifications associated with the rule.
In connection with this test, the Board also set forth three categories of employment policies and rules, representing a prospective classification of results from the Board’s application of the new test:
- Category 1 will include rules that the Board designates as 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. (E.g., no-camera requirements, civility rules).
- Category 2 will include rules that warrant individualized scrutiny in each case as to whether the rule would prohibit or interfere with NLRA rights, and if so, whether any adverse impact on NLRA-protected conduct is outweighed by legitimate justifications.
- Category 3 will include rules that the Board will designate as unlawful to maintain because they would prohibit or limit NLRA-protected conduct, and the adverse impact on NLRA rights is not outweighed by justifications associated with the rule. (E.g., a prohibition on the discussion of individual wages or benefits).
The Board asserts that this new standard “will provide far greater clarity and certainty to employees, employers and unions.” In addition, the standard “will ensure a meaningful balancing of employee rights and employer interests.”
Returning to the Prior Joint Employer Standard
In the 2015 case of Browning-Ferris Industries, 362 NLRB No. 186, the Board held that two or more employers are joint employers of the same employees if they “share or codetermine those matters governing the essential terms and conditions of employment.” Significantly, in that case, the Board specifically stated that it would no longer require that the employer actually exercise such authority to control the terms and conditions of employment; the mere possession of this authority would be sufficient to support a finding of joint employer status. In addition, the Board rejected the requirement that this authority must be exercised “directly and immediately.” Instead, it found that such authority may be exercised indirectly, through an intermediary (such as a staffing agency). In so holding, the Board overturned its 30+-year standard for determining joint employer status.
The Browning-Ferris decision caused consternation among employers, as it vastly expanded the universe of who would be deemed a joint employer. This included the typical staffing agency relationship, as well as franchise and subcontractor arrangements, and, as the current Board notes, user-supplier, lessor-lessee, parent-subsidiary, predecessor-successor, creditor-debtor, and contractor-consumer business relationships.
In Hy-Brand Industrial Contractors, Ltd., 365 NLRB No. 156, however, the current Board castigates Browning-Ferris, stating that it is “a distortion of common law as interpreted by the Board and the courts, it is contrary to the Act, it is ill-advised as a matter of policy, and its application would prevent the Board from discharging one of its primary responsibilities under the Act, which is to foster stability in labor-management relations.” Thus, the Board announced that it was overruling Browning-Ferris Industries and returning to the prior standard.
Under this reinstated standard, an entity must exercise direct control over the employees of the other entity in order to be considered a joint employer. Moreover, there must be actual exercise of this control, and the control must be “direct and immediate”; the mere possession of the authority to exercise such control or the indirect control over these employees is not enough to establish joint employer status. In addition, the control exercised by the host entity must be more than “limited and routine” in nature. Under prior Board law, supervision is limited and routine where the supervisor tells employees what work to perform, or when and where to perform the work, but does not tell the employee how to perform the work.
The Board states that the standard “reflects a common-sense, practical understanding of the nature of contractual relationships in our modern economy.” According to the Board, this standard is consistent with common law principles and brings stability to the bargaining relationship.
These decisions validate employers’ hopes that a Republican-majority Board would return a degree of common sense and balance to the Board’s interpretation and enforcement of the NLRA. The Board was divided along party lines in both decisions, and we can continue to expect this split as the Board continues to tackle many of the controversial decisions that were issued under the Obama administration.