A Moving Target: The NLRB Overturned Browning-Ferris – What’s Next?

Franchisors got an early Christmas present last month when the National Labor Relations Board (NLRB) broke on political lines in a 3-2 decision overruling Browning-Ferris Industries, 362 NLRB No. 186 (2015). In Hy-Brand Industrial Contractors, Ltd., 365 NLRB No. 165 (2017), the NLRB’s new Republican majority returned to the previous standard governing joint-employer liability. While the industry welcomes the news, there is still lingering uncertainty about the joint-employer threat.

The Hy-Brand majority rejected the controversial Browning-Ferris decision as “a distortion of common law” that was “ill-advised” and “contrary” to the National Labor Relations Act (NLRA). Courts analyzing the joint-employer issue will therefore return to the more concrete and well-defined test focusing on whether a putative joint employer “meaningfully affects matters relating to the employment relationship such as hiring, firing, discipline, supervision, and direction.” As a result, joint-employer liability should only arise when control over the employee is immediate and direct, as opposed to limited, routine, or reserved.

But franchisors are not entirely out of the woods. The Hy-Brand decision may be appealed. This year’s elections could signal shifting public opinion. For better or worse, states might adopt their own joint-employer laws. Unless Congress takes action to narrow or eliminate joint-employer liability, franchisors need to be careful about the extent of contact and/or control they have with the employees of their franchisees and clearly document their lack of control in their franchise agreements.