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Log In / Register | May 22, 2018

NLRB Reinstates Obama-Era Browning-Ferris Joint Employer Decision

The National Labor Relations Board last week unanimously vacated the Hy-Brand Industrial Contractors Ltd. and Brandt Construction Co. decision, which overturned the 2015 Browning-Ferris Industries Obama-era ruling that vastly expanded the definition of joint employer, determining that franchisors could be held liable with their franchisees on labor violations, even if the firms did not exert excessive control over franchisees' employment policies.

The February 26, 2018 ruling came under unusual circumstances. The NLRB stated that in light of the determination by the Board's Designated Agency Ethics Official that NLRB member William J. "Mike" Emanuel is, and should have been, disqualified from participating in the Hy-Brand decision making process in violation of ethics standards. The Labor Board stated, "Because we vacate the Board's earlier decision and order, the overruling of the Browning-Ferris decision is of no force or effect."

NLRB Inspector General David Berry sent a letter to Chairman Marvin E. Kaplan, Member Lauren McFerran and Member Mark Gaston Pearce on February 9, saying Member William Emanuel, a Trump appointee to the board "should have been recused from participation in Hy-Brand due to potential conflicts of interest. "Emanuel's former management-side law firm, Littler Mendelson, had represented one of the clients in Browning-Ferris. Emanuel had previously told Congress in a letter he was under no obligation to recuse himself because the connection between his former firm did not represent anyone in the Hy-Brand case."

Berry argued that because the ruling in Hy-Brand incorporated elements from the dissent in Browning-Ferris that linked the two cases, "The Board's deliberation in Hy-Brand, for all intents and purposes, was a continuation of the Board's deliberative process in Browning-Ferris."

The Competitive Enterprise Institute (CEI), a free-market public policy organization criticized the NLRB's ruling. CEI's labor policy expert Trey Kovacs said in a statement, "The NLRB's decision to vacate its own recent ruling on joint-employer liability now puts greater pressure on the Senate to pass the Save Local Business Act. This turn of events illustrates how no decision by the Board is permanent and why it is crucial for Congress to set a standard into law instead of letting regulators decide. Without a permanent legislative fix, the overly broad and vague Obama-era Browning-Ferris joint-employer standard is once again a threat to entrepreneurs and workers.

The International Franchise Association last December applauded the NLRB for reversing the Browning-Ferris standard, which "caused needless confusion and uncertainty for America's 733,000 franchise businesses and 7.6 million employees." Matt Haller, IFA senior vice president of government relations said at that time, "Today's decision helps create certainty for franchisors and franchisees in the near term and highlights the need for long-term certainty in this area."

After last week's reversal decision by the NLRB, Matt Haller stated, "Today's decision raises the level of urgency for the Senate to act on the bipartisan joint employer bill passed by the House last November. We are hopeful Senators can step into the breach created by today's decision and exercise their right to codify a definition of joint employer for small business owners everywhere and end the constant ping-ponging back and forth of this issue."

Other critics of NLRB's latest decision are also calling on the Senate to nullify the ruling.

House Education and Workforce Committee Chairwoman Virginia Foxx (R-N.C.) urged Senate lawmakers to take up the Save Local Business Act. She said, while the Board did its part to return to the traditional joint employer standard in late 2017, this development makes clear that the Senate must pass this legislation that would once and for all nullify the original Obama-era decision by rewriting the National Labor Relations Act.

Bloomberg/Quint also reported on NLRB's reversal decision. The article explained that "the controversial 2015 ruling that widened the circumstances under which a company can be considered a 'joint employer' of workers whom it doesn't directly pay, a lightning rod issue in franchise-filled industries from fast food to home care." The report referred to an interview last year with the International Franchise Association's "chief executive officer" Shelly Sun who gave her perspective of the "joint employer" issue. She said "the level of concern among the trade group's members was "similar to 30 minutes before the planes hit the World Trade Center."


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About Janet Sparks

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Janet Sparks is the former publisher of the Continental Franchise Review, an industry newsletter that covered the franchise community for over 30 years. She has also been a columnist for a leading franchise magazine for the past 13 years. Today she is an independent journalist who engages in investigative reporting, tackling complex issues that impact the franchise industry.

Janet can be reached at jsparks@bluemaumau.org or at 303-799-7398.