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NLRB Changes Employee Handbook Standard And Its Joint Employment Rule: What Employers Need To Know

The National Labor Relations Board (NLRB) is an independent federal agency that is charged with deciding cases brought under the National Labor Relations Act ("NLRA") of 1935. The NLRA was passed by Congress to protect the rights of employees and employers. Many of the law's provisions apply to private employers and not just to union employers.

Two recent decisions are worthy of note:

1. Joint Employer Standard

Until 2015, the standard used by the NLRB to determine if a company and its contractors or franchisees could be deemed a single joint employer was whether a business had "direct and immediate" control over the terms and conditions of employment. In 2015, the NLRB decided Browning-Ferris Industries of California (BFI), and expanded the standard to include the term "indirect control." BFI was considered to be a joint employer of workers who were employed by a staffing agency and supplied to BFI at one of its locations.

Recently, the NLRB returned to the pre-BFI standard in Hy-Brand Industrial Contractors Ltd. and Brandt Construction Co. The NLRB stated the BFI test had introduced instability in bargaining relationships.

2. Employee Handbooks

The NLRB decided Boeing Co. and Society of Professional Engineering Employees in Aerospace IFPTE Local 2001, abandoning an older standard, first set out in its 2004 Lutheran Heritage Village-Livonia case. In Lutheran Heritage, the NLRB had held that a corporate rule would be considered illegal if employees could "reasonably construe" the rule to bar them from exercising their rights under the NLRA.

However, the recent ruling in the Boeing case set out a different standard that would be applied to handbook rules going forward. The NLRB will now examine a challenged rule to consider the "nature and extent" of that rule's "potential impact on NLRA rights" and the "legitimate justifications associated with the rule." In other words, the rule will be judged by its effect on worker's rights balanced by the employer's legitimate business interest.


Commentary

With these recent decisions, a review of corporate handbooks and other business policies is in order.

The single joint employer test is described as:

“A finding of joint-employer status shall once again require proof that putative joint employer entities have 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.’”

Regarding a re-evaluation of employee handbooks, the NLRB will look at handbook policies as part of three categories. The first category covers rules that are legal in all cases because they cannot be reasonably interpreted to interfere with workers' rights or because any interference is outweighed by business interests.

The second category are rules that are legal in some cases depending on their application.

The third category covers rules that are always illegal because they interfere with workers' rights in a way not outweighed by business interests.

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