Most franchisors will be happy to hear that the NLRB on Dec. 14 nixed the Browning-Ferris expansion of the joint employer doctrine, which has been of concern to the franchise industry for several years. The new case is Hy-Brand Industrial Contractors, Ltd. and Brandt Construction Co, 361 NLRB No. 156 (Dec. 14, 2017). Even though the board held that Hy-Brand and Brandt are collectively joint employers for purposes of the National Labor Relations Act, the joint employer standard applied is a significant departure from the Browning-Ferris standard.

In a staunch rejection of the Browning-Ferris standard, the board in Hy-Brand stated: “We find that the Browning-Ferris standard is a distortion of common law as interpreted by the Board and the courts, it is contrary to the [National Labor Relations 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 [National Labor Relations Act], which is to foster stability in labor-management relations.” In a lengthy opinion explaining in detail its reasoning for this major move, the board expressly overruled Browning-Ferris, in favor of a return to the standards used prior to Browning-Ferris.

In a major Obama-era decision, Browning-Ferris Industries of California, Inc. 362 NLRB No. 186 (Aug. 27, 2015), the board found that an entity could be a joint employer with another if the first entity had the potential to exercise control over the labor and employment conditions of the second entity’s employees. Previously, the board had required the actual exercise of control by the first entity of the second entity’s employees. When applied, this expanded Browning-Ferris standard resulted in more and more separate and distinct employers being considered “joint employers” for purposes of the NLRA.  

What’s next?

So what does a return to a pre-Browning-Ferris joint employer doctrine look like? Under the previous standard that now applies again, two employers were only considered “joint employers” when they exerted significant and direct control over the same employees, such that they shared or co-determined matters relating to the essential terms and conditions of employment. Relevant factors include control over hiring, termination, discipline and supervision of employees. Control must be actual, direct and substantial — limited or routine control will not satisfy the joint-employer standard.

From a franchise standpoint, it is likely that the board’s decision in Hy-Brand will put franchisors at ease. Franchisors have been worried about whether typical brand controls could be construed as day-to-day operation standards regulating labor and employment relationships at franchisee locations, inadvertently leading franchisors and franchisees to be considered joint employers of the franchisee’s employees. Going forward, it is clear that typical, brand-related standards and requirements will not result in a finding of joint-employer status.

For more information about the NLRB decision or to inquire as to how your business or operations may be affected, please contact any of the attorneys in our Employment & Labor Group or Franchising & Distribution Group.