Dec. 15, 2017 NLRB’s New Republican Majority Overrules Two Important Labor-Friendly Decisions

Yesterday, the new Republican majority on the National Labor Relations Board (“NLRB” or “Board”) issued two important decisions overruling labor-friendly decisions under the National Labor Relations Act (“NLRA”).  In one, the NLRB overruled the landmark 2015 Browning-Ferris decision that expanded the test for determining joint employment status.  In the other, the Board reversed a controversial standard for weighing the legality of facially neutral workplace rules that could be interpreted by employees to infringe on their protected rights. 

Analysis

The Hy-Brand Industrial Contractors Decision

In Hy-Brand Industrial Contractors, Ltd., 365 NLRB No. 156 (2017), in a 3-2 decision, the Board overruled a decision by an Administrative Law Judge (“ALJ”) finding that Hy-Brand and Brandt Construction (two construction companies owned by the same individuals) were joint employers under the NLRA, and therefore were jointly and severally liable for the unlawful discharges of seven striking employees.  In doing so, the Board majority rejected the joint employer standard articulated in Browning-Ferris Industries, 362 NLRB No. 186 (2015).

Under Browning-Ferris, a joint employment relationship could exist when one entity merely “reserved” the right to exercise joint control over the terms and conditions of another entity’s employees, even if the right was never exercised.  For example, if a manufacturing company used temporary employees provided by an agency, and had work rules that the temporary employees had to follow, the manufacturing company would be considered a joint employer of those employees, along with the agency.

The Board rejected that standard—finding that it was a “distortion of common law” and “ill-advised as a matter of policy”—and instead adopted a stricter standard requiring proof of (a) one entity having actually exercised control over the essential employment terms of another entity’s employees, and (b) having done so “directly and immediately” in a manner that is neither limited nor routine.  Thus, for all pending and future cases, proof of indirect or contractually-reserved control that has never been exercised, or control that is limited and routine (e.g., not involving hiring, firing or discipline), will no longer be sufficient to establish a joint employer relationship. 

The Boeing Company Decision

In another 3-2 opinion, The Boeing Company, 365 NLRB No. 154 (2017), the Board overruled the “reasonably construe” standard previously articulated in Lutheran Heritage Village-Livonia, 343 NLRB No. 646 (2004).  Since the Lutheran Heritage decision was issued, and in particular during the second term of the Obama administration, the Board used that decision to strike down facially neutral work rules in dozens of cases, causing employers to rethink long-standing workplace policies.

The Boeing decision involved a “no-camera rule” restricting the use of camera-enabled devices (such as cell phones) on company property, which Boeing created to prevent the disclosure of  secure and sometimes classified work.  Although the “no camera rule” was facially neutral, the ALJ ruled that it violated the NLRA because employees could “reasonably construe” the rule as violating their concerted activity rights, such as taking photographs of a group protest. 

The Board rejected the Lutheran Heritage standard, finding that it entailed a “single-minded consideration of (employee) rights without taking into account any (employer) legitimate justifications” for workplace rules.  The Board articulated a new standard for employer workplace rules.  Now, in determining whether an otherwise facially neutral rule violates the NLRA, the Board will evaluate (a) the nature and extent of the potential impact of any facially neutral rule, policy, or handbook provision on NLRA rights, and (b) any legitimate justifications associated with any such rule, policy, or provision.  Applying this new standard, the Board found Boeing’s no-camera rule to be lawful.

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

The first category contains rules that are legal in all cases because they cannot be reasonably interpreted to prohibit or interfere with the exercise of NLRA rights or because the potential adverse impact on protected rights is outweighed by justifications for the rule. An example would be a rule that requires employees to abide by basic standards of civility.

  • The second category contains rules that warrant individualized scrutiny in each case as to whether the rule would prohibit or interfere with NLRA rights, and if so, whether the adverse impact on NLRA-protected conduct is outweighed by legitimate business justifications. As this category contains “sometimes lawful” rules, the Board did not provide an example.
  • The third category contains rules that are always unlawful because they would prohibit or limit NLRA-protected conduct in a manner not outweighed by legitimate business justifications. An example would be a rule that prohibits employees from discussing wages or benefits with one another.
  • The Board also opined that, though the maintenance of particular rules may be lawful, the application of such rules to employees who have engaged in NLRA-protected conducted may violate the NLRA, depending on the particular circumstances presented in a given case. 

What This Means

Employers need not make any changes to their policies due to these new decisions.  Employers can anticipate additional reversals of labor-friendly decisions, many of which were issued during the Obama era.  In fact, just today the Board issued another management-friendly decision, Raytheon Network Centric Systems, which only impacts unionized workplaces, and allows employers to change policies without a union’s permission if the employer has taken similar actions before.

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This E-Update was authored by Dani Nguyen Franke and Rod Betts.  For more information, please contact Ms. Franke, Mr. Betts, or any other Paul, Plevin attorney, by calling (619) 237-5200.