On December 14, 2017, the National Labor Relations Board (the “NLRB” or the “Board”) overruled Obama-era precedent involving two highly controversial decisions governing employee handbooks and joint employment standards.
Earlier this year, President Trump appointed two Republicans to the five-member NLRB resulting in a 3-2 Republican majority for the first time in a decade. As anticipated, the new “Trump Board” is beginning to dismantle a series of decisions that many believed to unfairly favor unions.
New Standard Governing Employee Handbooks
In a split 3-2 decision, the Board majority in . overturned its 2004 Lutheran Heritage standard, which had been used in recent years to render countless employer policies and rules unlawful. The former standard provided that a policy or rule is unlawful if employees could “reasonably construe” the language to bar them from exercising their rights under the NLRA, such as discussing terms and conditions of employment. For the past several years, the Lutheran Heritage standard has been heavily criticized for failing to take into account legitimate business justifications associated with employer policies, rules and handbook provisions in addition to yielding unpredictable and sometimes contradictory results. For example, the standard has deemed unlawful policies that require employees to “work harmoniously” or conduct themselves in a “positive and professional manner.”
In place of the Lutheran Heritage “reasonably construe” standard, the Board majority in Boeing Co. established a new test that balances workers’ rights against an employer’s business justifications. Now, when 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. The Board also announced three categories off rules that would be used to provide greater clarity and certainty to employees, employers and unions going forward.
Applying its new standard, the Board majority in Boeing Co. reversed the Administrative Law Judge’s decision and upheld as lawful Boeing’s so-called “no camera” rule, which prohibited employees from using camera-enabled devices to capture images or video without a valid business need and an approved camera permit. The Board reasoned that any adverse impact on worker’s rights was comparatively slight and outweighed by substantial and important justifications associated with the no-camera rule.
NLRB Ditches 2015 Joint Employer Standard
In another 3-2 decision along party lines, the NLRB in Hy-Brand Industrial Contractors overruled its 2015 decision in Browning-Ferris, which expanded joint-employer liability and threatened to turn every company that works with contingent workers, franchisees, and independent contractors into a joint employer under the NLRA. Under the former standard, the Board held that, the right to exercise minimal or “indirect” control over essential terms and conditions of employment, even if not actually exercised, was sufficient to create a joint employer relationship.
Under the Board’s new standard, two or more entities will be deemed joint employers under the NLRA if there is proof that one entity has actually exercised meaningful control over essential employment terms of another entity’s employees (rather than merely having reserved the right to exercise control) and has done so directly and immediately (rather than indirectly) in a manner that is not limited and routine. Thus, proof of indirect control, contractually-reserved control that has never been exercised, or control that is limited and routine will no longer be sufficient to establish a joint-employer relationship.
Applying this restored pre-2015 standard, the Board upheld the Administrative Law Judge’s determination that Hy-Brand Industrial Contractors, Ltd. and Brandt Construction Co. were joint employers and therefore jointly liable for the unlawful discharge of seven striking employees.
What This Means For Employers
The Board’s decision in Boeing Co. has been long awaited by union and non-union employers alike struggling to maintain compliance with the NLRB’s increasingly stringent requirements governing employer policies, rules and handbook provisions. The recent decision signals that the NLRB’s strict scrutiny of employer policies and rules may be winding down, and provides employers with an opportunity to maintain facially neutral policies with a legitimate business justification even if there may be some impact on workers’ rights under the NLRA. As always, annual review of employee handbooks is recommended for employers to keep up with the changing state of the law.
Likewise, the Board’s new standard governing joint employers is welcomed news in that raises the bar for establishing a joint employment relationship with staffing agencies, franchisees, and independent contractors where one entity merely exercises minimal or indirect control over the other. The joint employer determination is significant because it means that either entity may be subjected to joint liability for collective bargaining obligations, unfair labor practices, and breaches of collective bargaining agreements.
Employers should stay tuned for further developments as these two decisions are likely only the beginning of what is expected to come from the Trump Board in the coming months and years. For more information on anticipated changes from the Trump Board, see NLRB Requests Input Regarding Retention of 2014 Quickie Election Rules and New NLRB GC Resets the Clock on Husch Blackwell’s Labor Relations Law Insider Blog.