NLRB Changes Course on Standards Governing Joint-Employment and Workplace Rules and Policies
On December 14, 2018, the National Labor Relations Board issued two 3-2 decisions overruling prior opinions that had been the subject of criticism by employers. In each case, the Board members split by party affiliation, reflecting the impact of the Board’s new Republican majority.
The Joint-Employer Standard
In the Hy-Brand Industrial Contractors, Ltd. opinion, the NLRB overruled its 2015 decision in Browning-Ferris Industries with regard to the standard governing joint-employer liability. In Browning-Ferris, the Board had expanded its previous standard and concluded that an entity could be a joint employer if it exercised indirect control, held the unexercised potential to control, or exercised limited and routine control over work or working conditions. In the Hy-Brand Industrial Contractors decision, the Board concluded that the Browning-Ferris standard was a “distortion of common law,” was “contrary to the [National Labor Relations Act],” was “ill-advised as a matter of policy” and operated to prevent the Board from fostering stability in labor-management relations. Going forward, the pre-Browning-Ferris standard will apply, and joint-employer status will be determined based on whether there exists proof that one entity has exercised control over essential employment terms of another entity’s employees in a manner that is direct and immediate, as opposed to indirect or limited and routine.
Workplace Policies, Rules, and Employee Handbooks
In another opinion, The Boeing Company, the NLRB overruled its 2004 decision in Lutheran Heritage Village-Livonia concerning whether facially neutral workplace policies, rules, or handbook provisions unlawfully interfere with the exercise of rights under the NLRA. Pursuant to the standard established in Lutheran Heritage Village-Livonia, the Board previously deemed policies, rules, and provisions to be unlawful if they could be “reasonably construed” by an employee to prohibit the exercise of NLRA rights, even if those policies, rules, and provisions did not explicitly prohibit, were not adopted in response to, and were not applied to restrict protected activities. Under the new standard established in The Boeing Company, when analyzing a facially-neutral policy, rule, or provision that would potentially interfere with the exercise of NLRA rights, the NLRB will evaluate (i) the nature and extent of the potential impact on NLRA rights and (ii) the legitimate justifications associated with the policy, rule, or provision. The NLRB emphasized that it will conduct this evaluation consistent with its duty to strike a proper balance between asserted business justifications and the invasion of employee rights with a focus on the perspective of employees, but that the Board would no longer defer to the single inquiry of “whether an employee ‘would reasonably construe’ a rule to prohibit some type of potential Section 7 activity that might (or might not) occur in the future.”
Additionally, the Board defined three categories into which it will classify policies, rules, and provisions analyzed under the newly established test on an ongoing basis.
Category 1 will include rules deemed to be lawful because either: (i) they do not prohibit or interfere with the exercise of NLRA rights when reasonably interpreted, or (ii) the potential adverse impact is outweighed by the employer’s justifications for the rule. For example, no-camera rules (such as the one now deemed lawful by The Boeing Company due to Boeing’s security needs) and basic standards of civility rules will fall into this category.
Category 2 will include rules that require individualized scrutiny in each case to determine whether the rule impairs NLRA rights, and, if so, whether such adverse impact is outweighed by legitimate justifications.
Category 3 will include rules that are deemed unlawful because they impair the exercise of NLRA rights without sufficient justification, such as rules prohibiting employees from discussing wages or benefits with each other.
The Board explained that it will determine in future cases what types of additional rules fall into each of these categories, and that even if the maintenance of a particular rule is lawful under the new test, the Board will continue to examine circumstances where the application of discipline under lawful rules may be found to violate the NLRA.
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