In a flurry of decisions late last week, the newly-constituted majority of the National Labor Relations Board (NLRB or the Board) issued a number of decisions that signal a less interventionist approach with respect to the employer-employee relationship. Three of these decisions in particular will have wide-reaching benefits for union and non-union employers alike, as they will: (1) heighten the standard for finding that two entities are so-called “joint employers,” (2) reduce Board scrutiny over workplace rules and policies, and (3) relax the showing an employer must make to add employees to a petitioned-for bargaining unit.
In Hy-Brand Indus. Contractors, Ltd., the Board addressed the joint-employer standard, restoring joint-employer status to entities only with “direct and immediate” control over terms of employment.
Two-plus years ago, on August 27, 2015, the Board overturned longstanding precedent when it issued a then widely-anticipated decision in Browning-Ferris Industries of California Inc., 362 NLRB No. 186. That decision significantly broadened the standard—beyond any other statutory or common law test—for when two entities may be considered “joint employers” under the National Labor Relations Act (NLRA or the Act). Under the broad Browning-Ferris standard, a company could face liability under the Act (and be required to bargain with another employer’s union) if the company merely reserved the right—even an attenuated or indirect right—to exert control over those employees’ terms and conditions of employment. Browning-Ferris was a controversial decision that had an acute impact on several close but arms-length business relationships, including franchisor-franchisee, creditor-debtor, parent-subsidiary and contractor-subcontractor relationships.
Now Browning-Ferris is no longer. In Hy-Brand, the Board reversed Browning-Ferris and returned to the previous joint-employer standard accepted by federal courts in other employment contexts. Now, as before, “a finding of joint-employer status requires proof that the alleged joint-employer entities have actually exercised joint control over essential employment terms (rather than merely having ‘reserved’ the right to exercise control), the control must be ‘direct and immediate’ (rather than indirect), and joint-employer status will not result from control that is ‘limited and routine.’” Established arms-length business relationships are again free from Board scrutiny to the extent parent companies, franchisors, creditors and contractors do not actually exercise control over the employees of their subsidiaries, franchisees, debtors and subcontractors, respectively.
The Hy-Brand decision can be found here: https://dlbjbjzgnk95t.cloudfront.net/0995000/995174/hy-brand.pdf.
In The Boeing Co., the Board relaxed its scrutiny over potentially unlawful workplace rules and policies by holding that an employer’s justifications for such rules must be taken into consideration.
In 2004, the Board issued Lutheran Heritage, 343 NLRB 646. There the Board held that maintaining a facially neutral rule in an employee handbook could be unlawful if employees “would reasonably construe the language to prohibit” activity protected by the Act. Over the past decade-plus, the Board has applied Lutheran Heritage to find that employers violated the Act by maintaining policies, by way of example, that:
- promoted “harmonious interactions and relationships,”
- prohibited “inappropriate discussions about the company” on social media,
- prohibited “loud, abusive, or foul language,”
- required employees to “keep customer and employee information secure,” and
- directed employees to “voice your complaints directly to your immediate supervisor or to Human Resources through our ‘open door’ policy.”
In Boeing, the Board scrapped Lutheran Heritage and announced a new rule:
“[W]hen evaluating a facially neutral policy, rule or handbook provision that, when reasonably interpreted, would potentially interfere with the exercise of NLRA rights, the Board will evaluate two things: (i) the nature and extent of the potential impact on NLRA rights, and (ii) legitimate justifications associated with the rule.”
Under this new standard, a facially neutral rule will be deemed lawful if either (a) the rule, when reasonably interpreted, does not prohibit or interfere with protected NLRA rights or (b) the potential adverse impact on protected rights is outweighed by justifications associated with the rule. Thus, rules requiring employees to abide by “basic standards of civility” will now be lawful. (That said, the application of any given rule to employees who have engaged in NLRA-protected conduct may violate the Act depending on the circumstances.)
Conversely, a rule will be deemed unlawful if it would prohibit or limit protected conduct that is not outweighed by justifications associated with the rule. An example of a “facially neutral” but still unlawful rule is one prohibiting employees from discussing wages or benefits.
Other rules will warrant individualized scrutiny as to whether the rule would prohibit or interfere with NLRA rights, and, if so, whether any adverse impact on NLRA-protected conduct is outweighed by legitimate justifications. The Board did not provide guidance on this category of rules—a point criticized by the dissent in Boeing.
The Boeing decision can be found here: https://dlbjbjzgnk95t.cloudfront.net/0995000/995170/decision.pdf.
In PCC Structurals, Inc., the Board reversed the Obama Board’s “micro-unit” standard, relaxing the showing that an employer must make to add employees to a petitioned-for bargaining unit.
In 2011 the Board issued Specialty Healthcare & Rehabilitation Center of Mobile, 357 NLRB 934. There the Board held that once a proposed unit of employees is deemed appropriate for union representation, the burden shifts to the proponent of a larger unit (typically the employer) to demonstrate that the additional employees the proponent seeks to include share an “overwhelming community of interest” with the petitioned-for employees, “such that there is no legitimate basis upon which to exclude certain employees from” the unit. As a result of this substantial burden, employers were largely unable to challenge so-called “micro-units,” which allowed unions to more easily organize employers by targeting smaller groups of employees who favored union representation. Specialty Healthcare also caused uncertainty for employers trying to determine how best to organize their workforces.
In PCC Structurals the Board ditched Specialty Healthcare, holding that its standard “effectively makes the extent of union organizing ‘controlling,’ or at the very least gives far greater weight to that factor than statutory policy warrants.” Thus the Board stated it was “returning to the traditional community-of-interest standard that the Board has applied throughout most of its history, which permits the Board to evaluate the interests of all employees—both those within and those outside the petitioned-for unit—without regard to whether these groups share an ‘overwhelming’ community of interests” (emphasis added).
Under that “traditional” standard, the Board will examine whether petitioned-for employees share a community of interest “sufficiently distinct from the interests of employees excluded from the petitioned-for group to warrant a finding that the proposed group constitutes a separate appropriate unit.” The Board will consider the following factors, as it has “[t]hroughout nearly all of its history”:
whether the employees are organized into a separate department; have distinct skills and training; have distinct job functions and perform distinct work, including inquiry into the amount and type of job overlap between classifications; are functionally integrated with the Employer’s other employees; have frequent contact with other employees; interchange with other employees; have distinct terms and conditions of employment; and are separately supervised.
By overturning Specialty Healthcare, the Board claims to “correct[ ] the imbalance” created by making the relationships between petitioned-for unit employees and excluded coworkers “irrelevant in all but the most exceptional circumstances.” Now, says the Board, “the determination of unit appropriateness will consider the Section 7 rights of employees excluded from the proposed unit and those included in that unit, regardless of whether there are ‘overwhelming’ interests between the two groups.”
Under PCC Structurals employers will undoubtedly have greater success challenging proposed bargaining units than in previous years. Perhaps more importantly, unions will not be able to use slight differences in terms and conditions of employment between groups or classifications of employee as an organizing tool to gain a foothold at an employer’s business. Nevertheless, employers—particularly those in industries subject to union organizing—should continue to think carefully about how their workforces are structured.
PCC Structurals can be found here: https://dlbjbjzgnk95t.cloudfront.net/0995000/995764/board%20decision.pdf.