Continue to Site

    NLRB Curses Restaurants with Unworkable Joint-Employer Test—For Now

  • For many operators, the Board's latest ruling was a stinging setback.

    thinkstock
    The obvious question is how long will we be cursed by living in “interesting times?”

    In 1966, Robert F. Kennedy recognized the Chinese curse “May You Live In Interesting Times.” For the restaurant industry, the NLRB’s approach to the joint-employer test is the curse that keeps on giving and is precisely the “Interesting Times” Kennedy spoke of.

    In what those of us that support the restaurant industry hope is just a temporary—but stinging—setback, the National Labor Relations Board (NLRB) recently vacated its December ruling that kept franchisors and franchisees from having to deal with an unworkable and expansive legal test for determining whether an entity was considered a joint employer.

    Quick Recap: Where Were We?

    For 30 years, the NLRB had held that two companies would only be considered joint employers if they share or codetermine those matters governing the essential terms and conditions of employment. Under this standard, an employer would only be held to be jointly employing workers if they actually exercised the right to control. Moreover, under this standard, the exercise of such control must have been direct, immediate, and not limited and routine.

    However, in a controversial August 2015 ruling against Browning-Ferris Industries, the Board renounced this joint-employer test, eliminating the requirement that the employer actually exercise control. Instead, the NLRB decided that businesses need only retain the contractual right to control to be considered a joint employer—even if it has never exercised it. Further, the Board rejected the direct, immediate, and not limited and routine criteria, holding instead that indirect control (e.g., control through an intermediary) would be sufficient to find joint employment.

    What Happened Recently?

    In December 2017, the Board effectively overturned Browning-Ferris in the Hy-Brand Industrial Contractors, Ltd. case, reverting to the old standard. One of the new Board members that decided that case was William Emanuel, who was confirmed by the Senate and formally assumed a role on the NLRB in September 2017. Before joining the Board, Emanuel worked for an employer-side private law firm that happened to have represented one of the companies in the pivotal Browning-Ferris case from 2015. Once his prior law firm’s involvement became apparent, some members of Congress put pressure on the Board to take action and wipe the Hy-Brand decision from the books.

    Ultimately, the NLRB bowed to that pressure. It issued an order vacating the decision “in light of the determination by the Board’s Designated Agency Ethics Official that Member Emanuel is, and should have been, disqualified from participating in this proceeding.” It concluded that the legal standard re-adopted by the Hy-Brand case was now without force or effect, meaning that the Browning-Ferris standard is once again law of the land.

    What Does This Mean For Restaurant Franchisors and Franchisees?

    Today’s order means those of us working in and supporting the restaurant industry are once again living in a world where the Browning-Ferris standard controls. Employers need not actually exercise control over third-party employees in order to be deemed their joint employer. Instead, the business need only retain the contractual right to control, even if it never exercises it. Further, even indirect control (e.g., control through an intermediary) is now sufficient for such a finding. 

    Given that the Board breathed new life into the Browning-Ferris standard, any restaurant franchisor that retains the right to impose even indirect control over the working conditions of temporarily placed employees runs a serious risk of being deemed their joint employer—not only for bargaining purposes, but potentially for unfair labor practice liability as well. 

    What Now?

    The obvious question is how long will we be cursed by living in “interesting times?” It is hard to say. The NLRB should once again regain a five-member panel in the very near future, as the Senate is currently scheduled to vote on the Trump Administration’s nominee John Ring. Assuming Ring is confirmed, the Board will once again have a three-member majority appointed by President Trump and will be free to continue its efforts of restoring balance to the nation’s labor law. The Board may very well attempt to identify a joint employment case that is not tainted by Emanuel’s prior law firm relationship and once again do away with the current unworkable standard.

    Unfortunately, as a result of today’s order, restaurant franchisors and franchisees alike need to once again scrutinize the parameters within their written service agreements and their underlying practices for reference to right to control. This includes an analysis of pre-employment qualification and hiring standards, assignment and retention of individual temporary employees, shift schedules, workload and pace of work, and wages and benefits.

    Alden J. Parker is the regional managing partner of the Fisher Phillips Sacramento office. He can be reached at [email protected].