National Labor Relations Board Reverses Browning-Ferris Joint-Employer Standard and Lutheran Heritage Employee Handbook Standard

Republican Majority Overturned Precedents that Had Been Roundly Criticized by Employers December 19, 2017
On December 14, 2017, the NLRB issued two significant decisions that affect both unionized and non-unionized employers.  In Hy-Brand Industrial Contractors, Ltd. et al., the Board overturned its 2015 Browning-Ferris decision, returning to the original test that Browning-Ferris had upended – i.e., that two entities may be considered “joint employers” only if each exercises “direct and immediate” control over the terms and conditions of employment.  And, in The Boeing Company, the Board overturned its 2004 Lutheran Heritage decision, which held that an employee handbook policy is illegal if employees could reasonably construe it to bar them from exercising their right to concerted activity under the National Labor Relations Act.  The Lutheran Heritage decision had been used by the Board in recent years to invalidate all manner of employment policies, including social media policies.

In Hy-Brand Industrial Contractors, Ltd. et al., the Board overturned Browning-Ferris Industries, 362 NLRB 186 (2015), in which the Board abandoned its long-standing test that an entity must both possess and exercise direct control over employees’ terms and conditions of employment in order to be considered a joint employer and, thus, be required to bargain with a union.  The Browning-Ferris standard provided that a joint-employer relationship may be found merely based on the putative joint employer’s right to control terms and conditions of employment, irrespective of whether such control is directly exercised or exercised at all.  View our memo on the Browning-Ferris decision and the Hy-Brand decision.  The Hy-Brand decision returns Board precedent to the joint-employer standard that was in place prior to Browning-Ferris; under that standard, two entities may be considered joint employers if each exercises “direct and immediate” control over the terms and conditions of employment.  In its decision, the Board said that the reinstated standard “has served labor law and collective bargaining well” and “is understandable and rooted in the real world.”  This decision likely will be welcomed by franchisors, companies that employ independent contractors and companies that utilize staffing agencies.  (The Board found that a joint-employer relationship existed in Hy-Brand despite the more relaxed standard.)

In Boeing, the Board held that an employment policy must be evaluated under a balancing test that balances “the nature and extent of the potential impact on NLRA rights” against the “legitimate justifications associated with the rule.”  View the decision.  The decision overturned the Board’s holding in Lutheran Heritage Village-Livonia, 343 NLRB 646 (2004), which invalidated employer handbook rules if an employee could “reasonably construe” a rule as prohibiting his or her right to protected concerted activity under the NLRA.  The Board, particularly in recent years, had relied on the Lutheran Heritage standard when invalidating widely used employment policies, such as social media rules that prohibit employees from making disparaging comments about their employer on Facebook.  In Boeing, the Board held that in future cases it would use the balancing test to classify employer rules, policies and handbook provisions within one of three categories, as follows:
  • Category 1:  “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.”  A rule requiring employees “to abide by basic standards of civility” is an example of a “Category 1” policy.
     
  • Category 2:  rules that require case-by-case scrutiny to determine whether the rule interferes with NLRA rights and, if so, whether the impact of the interference is outweighed by the employer’s legitimate justifications for the rule.
     
  • Category 3:  rules designated as “unlawful” because they would prohibit or limit an NLRA right and the impact of the rule is not outweighed by the employer’s justifications.  A rule prohibiting employees from discussing wages or benefits with each other is an example of a “Category 3” rule.
In Boeing, the Board held that the employer’s prohibition on the use of phones with cameras on company property was a “Category 1” rule and, thus, permissible under the NLRA.

Both decisions were made by the Board’s newly installed Republican majority – Chairman Philip Miscimarra, Marvin Kaplan and Bill Emanuel.  Chairman Miscimarra, a frequent dissenter from Board decisions during the Obama administration, has said publicly that he believes Board decisions should favor bright-line rules so that employers and employees have clear guidance on which conduct is and is not lawful under the NLRA.  Chairman Miscimarra’s term expired on December 16, leaving the Board evenly split between Democrats and Republicans.  President Trump has not nominated a replacement for his seat yet.

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