NLRB overrules joint-employer decision on labor violations

The National Labor Relations Board (NLRB) overruled a controversial Obama-era decision late Thursday that put employers potentially on the hook for labor law violations committed by their subcontractors.  

In a 3-2 decision, the Republican-controlled board overruled the board’s previous 2015 decision in a case, known as Browning-Ferris, which found a company to be considered a joint-employer with a subcontractor if it has “indirect” control over the terms and conditions of employment or has the “reserved authority to do so.”   

In a statement, NLRB said in all future and pending cases two or more entities will be deemed joint employers under the National Labor Relations Act (NLRA) if there is proof that one entity has exercised direct and immediate control over essential employment terms of another entity’s employees.  

Accordingly, under the pre–Browning-Ferris standard restored today, proof of indirect control, contractually-reserved control that has never been exercised, or control that is limited and routine will not be sufficient to establish a joint-employer relationship. The board majority concluded that the reinstated standard adheres to the common law and is supported by the NLRA’s policy of promoting stability and predictability in bargaining relationships. 

Republicans and business groups have long fought the ruling, claiming it blurred the lines of responsibility in disputes over working conditions, wages and work.

The House passed legislation last month offered by Rep. Bradley Byrne (R-Ala.) to reverse the ruling and permanently change the definition of an “employer” in the NLRA and the Fair Labor Standards Act.

In its decision Thursday, the board called the standard created by Browning-Ferris “a distortion of common law” that prevents the board from “discharging one of its primary responsibilities under the Act, which is to foster stability in labor-management relations.” 

The case challenged a previous ruling that found a contractor to be a joint-employer with a construction company. The board said it agreed with the judge that the companies were joint employers, but disagreed with the legal standard the judge applied to reach that finding.

The National Restaurant Association, which feared the 2015 ruling threatened the franchisee model, hailed the board for its decision.

“The 2015 Browning-Ferris ruling stacked the deck against small businesses and inserted uncertainty into day to day operations,” Cicely Simpson, the group’s executive vice president of public affairs, said in a statement.

“Today’s decision restores years of established law and brings back clarity for restaurants and small businesses across the country.”

The NLRB recently experienced a major shift under President Trump, who came into office with two vacancies to fill. 

Trump’s newly minted members, Marvin Kaplan and William Emanuel, sided with outgoing board Chairman Philip Miscimarra, whose term expires on Sunday at midnight

Democratic members Mark Gaston Pearce and Lauren McFerran dissented in the case.