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NLRB makes significant reversals on workplace policies,  joint employer standard
By Katherine Fechte, Audrie Howard on December 15, 2017 at 11:00 AM EST

Sign shows reverse directionThe National Labor Relations Board (NLRB) on Dec. 14, 2017, overturned significant prior precedent related to its position governing workplace policies and handbooks and its joint employer standard. These decisions are significant because they reversed two previous standards that had caused numerous headaches for employers.

The board determines the ‘reasonably construe’ test for employer policies lacks common sense

In The Boeing Company and Society of Professional Engineering Employees in Aerospace, IFPTE Local 2001, 365 NLRB No. 154 (Dec. 14, 2017), the NLRB was asked to review the Boeing Company’s no-camera rule and determine whether the policy violated employees’ Section 7 rights. Under the existing NLRB standard, set forth in Lutheran Heritage Village-Livonia, 343 NLRB 646 (2004), facially neutral rules violated the NLRA, even if those rules did 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 employee to prohibit the exercise of NLRA rights.

In a 3-2 decision, the NLRB overruled Lutheran Heritage. The board majority said the reasonably construed test was exceptionally difficult to apply, created immense uncertainty for the board, courts, employers, employees and unions, and resulted in rampant confusion as to what rules and policies and handbook provisions were acceptable. The board found:

These problems have been exacerbated by the zeal that has characterized the Board’s application of the Lutheran Heritage “reasonably construe” test. Over the past decade and one-half, the Board has invalidated a large number of common-sense rules and requirements that most people would reasonably expect every employer to maintain. We do not believe that when Congress adopted the NLRA in 1935, it envisioned that an employer would violate federal law whenever employees were advised to “work harmoniously” or conduct themselves in a “positive and professional manner.”

In place of the “reasonably construe” standard, the board established a new test: When evaluating a facially neutral policy, rule or handbook provision that would potentially interfere with the exercise of NLRA rights, the board will evaluate two things:

  1. the nature and extent of the potential impact on NLRA rights, and
  2. legitimate justifications associated with the rule.

The board also announced that, prospectively, three categories of rules will be delineated to provide greater clarity and certainty to employees, employers, and unions:

  • Category 1 will include rules that the board designates as lawful to maintain, either because (i) the rule, when reasonably interpreted, does not prohibit or interfere with the exercise of NLRA rights; or (ii) the potential adverse impact on protected rights is outweighed by justifications associated with the rule. An example of a Category 1 rule would be a rule requiring employees to conduct themselves in a professional manner.
  • Category 2 will include rules that warrant individualized scrutiny in each case 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. Boeing’s no-camera rule fit within this category.
  • Category 3 will include rules that the board will designate as unlawful to maintain because they would prohibit or limit NLRA-protected conduct, and the adverse impact on NLRA rights is not outweighed by justifications associated with the rule. An example would be a rule that prohibits employees from discussing wages or benefits with one another.

In applying this new standard to the Boeing Company’s no-camera policy, the board concluded that Boeing lawfully maintained a rule that prohibited employees from using camera-enabled devices to capture images or video without a valid business need and an approved camera permit.  The board majority reasoned that the rule potentially affected the exercise of NLRA rights, but that the impact was comparatively slight and outweighed by important justifications, including national security concerns. 

Board returns to pre-Browning-Ferris joint employer standards

In Hy-Brand Industrial Contractors, Ltd. and Brandt Construction Co., 361 NLRB No. 156 (Dec. 14, 2017), the NLRB nixed the Browning-Ferris expansion of the joint employer doctrine. Although the board ultimately concluded that Hy-Brand and Brandt are collectively joint employers for purposes of the NLRA, the NLRB rejected the Browning-Ferris standard, stating:

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 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 Act, which is to foster stability in labor-management relations.

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. Importantly, an entity could be a joint employer with another even if no actual control was exercised. 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.

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. Unlike the Browning-Ferris standard, 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 the board’s decision in Hy-Brand will put franchisors at ease. 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 either of these major recent NLRB decisions or to inquire as to how your business or operations may be affected, please contact any of the attorneys in our Employment & Labor Group.

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