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A newly appointed Republican majority on the National Labor Relations Board has overturned two Obama administration rulings related to joint employment and handbooks.
With both rulings, the board has “taken us back to the days of existing precedent and reversed the radical decisions of the previous labor board,” said Michael Lotito, co-chair of Littler Mendelson P.C.’s Workplace Policy Institute in San Francisco.
In a 3-2 ruling Thursday, the board overturned its 2015 Browning Ferris Industries of California Inc. ruling on joint-employer liability and returned to the pre-Browning Ferris standard, it said in a statement. Those ruling for the majority included Republican chairman Philip A. Miscimarra, whose term expires Saturday.
The ruling overturned the standard in place since 1984 that firms must have “immediate and direct” control over a worker to be considered a joint employer. Instead, it held that a company need have only indirect control of a worker and not even exercise that control to be considered a joint employer.
The NLRB said in its statement Thursday that now two or more entities will be deemed joint employers under the National Labor Relations Act if “there is proof one entity has exercised control over essential employment terms of another entity’s employees (rather than merely having the right to exercise control) and has done so directly and immediately (rather than indirectly) in a manner that is not limited and routine.”
The statement said under the now-restored pre-Browning-Ferris standard, “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 case before the board involved Muscatine, Iowa-based Hy-Brand Industrial Controls Ltd. and Milan, Illinois-based Brand Construction Co. The board ruled the two firms were joint employers and therefore jointly and severally liable for the unlawful discharge of seven striking employees.
Mark D. Kisicki, a shareholder with Ogletree, Deakins, Nash, Smoak & Stewart P.C. in Phoenix, who had represented Browning-Ferris Industries Inc., said the board’s 2015 ruling was “expansive in scope, but the board failed to provide any guidelines as to how it was going to be applied, and consequently created a conundrum for players and all business entities that operate in varying degrees of exercising control over another entities’ employees indirectly.”
With the new ruling, “employers will now be able to look at any business transaction and structure” and recognize whether they are joint employers, Mr. Kisicki said.
He noted the language of the board’s decision mirrors in many places the dissent to the 2015 opinion that had been issued by Mr. Miscimarra. The two other board members in the Republican majority in both cases were newly appointed Republicans Marvin E. Kaplan and William J. Emanuel.
The two dissenting votes in both Thursday rulings were Obama appointees Mark Gaston Pearce and Lauren McFerran.
“It’s certainly a win for employers,” said Richard D. Glovsky, a partner at Locke Lord L.L.P. in Boston. “It will help absolve employers for liability in a lot of circumstances, and I think it’s particularly helpful for entities like job placement firms who place people on jobs on a temporary basis.”
He added, however, “It wouldn’t shock me at all if this gets challenged in the courts,” and the question remains as to how far the courts will defer to the board.
Browning-Ferris “was one of the most controversial and troublesome decisions that the board had rendered,” said Zachary D. Fasman, a partner with Proskauer Rose L.L.P. in New York.
In the employee handbook case, the NLRB’s 3-2 ruling overturned a 2004 board decision in Lutheran Heritage Village-Livonia, in which the board found employers violated the NLRA “by maintaining workplace rules that do not explicitly prohibit protected activities, were not adopted in response to such activities, and were not applied to restrict such activities, if the rules would be ‘reasonably construed’ by an employer to prohibit the exercise of NLRA rights.”
In the ruling before it, the board held that Chicago-based Boeing Co. had lawfully maintained a no-camera rule that prohibited employees from using camera-enabled devices to capture images or video “without a valid business need and an approved camera permit.”
Employer attorneys have complained that the NLRB’s efforts to prosecute firms for handbook violations have been onerous.
Mr. Lotito said various NLRB rulings on the issue of handbooks had created “tremendous confusion among employers as to what sorts of policies would pass muster by the board.”
He said in many cases, companies under investigation for other issues would be routinely asked for copies of their handbooks, and the investigators would often find a problem, even though it was not the allegedly unfair labor practice originally being investigated. The board was using handbooks against employers “very effectively,” he said.
The new ruling follows a “more common-sense approach,” Mr. Lotito said.
“The whole area has become a mess under the prior standard,” said Mr. Fasman. “There’s a very, very bizarre set of decisions,” and the board has now provided clarity, he said.
Last week, the NLRB’s new general counsel, Peter B. Robb, sent a memo to regional offices signaling there would be significant policy changes.
Experts say that given the NLRB’s process, these rulings have been in the works for some time, and were not in response to the Robb memo.
(Reuters) — The National Labor Relations Board is expected to rule soon on if, and how, companies can be held responsible for labor violations carried out by their contractors or franchisees — a move that could have far-reaching implications for businesses.