NLRB Proposes New Rule on Joint Employer Standard

Q.  What is the current rule for determining whether two employers are considered to be “joint employers” under the National Labor Relations Act?

A.  On September 14, 2018, the National Labor Relations Board (NLRB) proposed a new regulation that would make it more challenging to establish joint employer status under the National Labor Relations Act. The proposed rule dictates that two entities will be joint employers only if each exercises substantial direct and immediate control over employees.

As we reported previously, in 2015, the NLRB significantly relaxed the standard for proving that two entities are joint employers in Browning-Ferris Industries of California, Inc. d/b/a BFI Newby Island Recyclery, 362 NLRB No. 186 (2015). In Browning-Ferris, decided during the Obama administration, the NLRB ruled that entities could be joint employers even if one had only indirect, limited and routine control or the unexercised right to control employees’ terms and conditions of employment. The NLRB reversed course in December 2017 during the Trump administration, overruling Browning-Ferris and reinstating the standard for joint employer status that had existed previously – that entities are joint employers only if each has exercised direct and immediate control over employees. See Hy-Brand Industrial Contractors, Ltd., 365 NLRB No. 156 (2017). The Hy-Brand ruling was short-lived, however. The NLRB vacated that ruling earlier this year due to the conflict of interest of one of the NLRB’s members who participated in the decision. In the meantime, a petition for review of Browning-Ferris is pending in the D.C. Circuit Court of Appeals.

Now, the NLRB seeks to establish a stricter joint employer standard by regulation. Doing so would add more permanence to the joint employer standard than interpreting it through case law, which often changes from one presidential administration to the next. The NLRB explained in its Federal Register notice that it would benefit from public comment on the joint employer standard “given the recent oscillation on the joint-employer standard, the wide variety of business relationships that it may affect (e.g., user-supplier, contractor-subcontractor, franchisor-franchisee, predecessor-successor, creditor-debtor, lessor-lessee, parent-subsidiary, and contractor-consumer), and the wide-ranging import of a joint-employer determination for the affected parties.”

The NLRB’s proposed rule enunciates the following test for joint employer status:

An employer, as defined by Section 2(2) of the National Labor Relations Act (the Act), may be considered a joint employer of a separate employer’s employees only if the two employers share or codetermine the employees’ essential terms and conditions of employment, such as hiring, firing, discipline, supervision and direction. A putative joint employer must possess and actually exercise substantial direct and immediate control over the employees’ essential terms and conditions of employment in a manner that is not limited and routine.

The NLRB included 10 examples with the proposed rule “to help clarify what constitutes direct and immediate control over essential terms and conditions of employment.” For example, the NLRB concluded that the following scenario reflects one company’s direct and immediate control over another company’s employees: Company A supplies labor to Company B and, pursuant to the contract between them, Company A is required to pay a particular wage rate. In that situation, Company B exercises direct and immediate control over wage rates. In another example, a franchisor requires its franchisee to operate the franchisee’s store between specified hours. The franchisor does not exercise direct and immediate control over the essential terms and conditions of employment of the franchisee’s employees because the franchisor is not involved in scheduling the franchisee’s employees or in determining shift durations.

The NLRB’s proposed rule will now go through the time-consuming rulemaking process. As employers wait for the publication of a final rule, companies can minimize the risk of joint employer status by avoiding involvement in decisions regarding another company’s employees, including decisions regarding pay, hiring, discipline or termination.

–Susan K. Lessack

 

NLRB Flip Flops on Browning Ferris Standard for Joint Employment (Again)

Q.  What is the standard for determining whether two companies are joint employers?

A.  On February 26, the National Labor Relations Board (NLRB) decided unanimously to vacate its decision in Hy-Brand Industrial Contractors, Ltd., 365 NLRB No. 156 (2017) (vacated at 366 NLRB No. 26).  As we reported previously, in December 2017, the NLRB issued a 3-2 decision in Hy-Brand, in which it overruled the controversial joint-employer standard articulated in Browning-Ferris Industries of California, Inc. d/b/a BFI Newby Island Recyclery, 362 NLRB No. 186 (2015). The Browning-Ferris decision had significantly relaxed the standard for proving that two entities are joint employers, ruling that entities could be joint employers even if one had only indirect control or the unexercised right to control employees’ terms and conditions of employment. The Hy-Brand decision returned to the pre-Browning-Ferris standard for finding joint-employer status, under which entities are joint employers only if each has exercised direct and immediate control over employees.

With this latest development, at least for now, the Browning-Ferris standard is in effect again, making it much easier for employees and unions to establish that two companies are joint employers.

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Susan K. Lessack

Termination for Social Media Activity May Result in Unemployment Compensation Benefits

Q.  Our Company just terminated an employee for a social media post that was in violation of our social media policy. Will she be entitled to unemployment compensation benefits?

A.  Possibly.

While unemployment compensation laws vary from state-to-state, former employees generally are entitled to benefits unless the employer can prove that the employee’s employment ended due to a disqualifying reason, such as willful misconduct or voluntary discharge.

In a recent Pennsylvania Commonwealth Court decision, Waverly Heights, Ltd. v. Unemployment Compensation Board of Review, the Court affirmed a benefits award to a former human resources executive who was terminated for sending what the employer deemed to be a racially-charged tweet about the 2016 presidential election. Until her termination, Kathleen Jungclaus had served as the vice president of human resources of a retirement care community for nearly 20 years. Ms. Jungclaus was terminated when she posted a tweet to her personal Twitter account in July 2016 that stated “@realDonaldTrump I am the VP of HR in a comp outside of philly an informal survey of our employees shows 100% AA employees voting Trump!” Per the employer, “AA” referred to African Americans and Ms. Jungclaus’s tweet was an admission to singling out black staff members and asking them about their political preferences.

Ms. Jungclaus’s employer maintained a social media policy that stated it was the employer’s expectation that employees “who identify themselves with” the employer on social media promote and protect the reputation, dignity, respect, and confidentiality of the employer’s residents, clients and employees. Because of the racially-charged nature of the Tweet (and its presumed reference to African American employees), the employer argued that Ms. Jungclaus’s termination for violating the company’s social media policy constituted willful misconduct.

For Pennsylvania Unemployment Compensation Law purposes, “willful misconduct” is defined as “(1) wanton and willful disregard of an employer’s interests; (2) deliberate violation of rules; (3) disregard of the standards of behavior which an employer can rightfully expect from an employee; or, (4) negligence showing an intentional disregard of the employer’s interests or the employee’s duties and obligations.” When an employer seeks to deny a former employee unemployment compensation benefits based on a rule or policy violation, the employer must prove (a) the existence of the rule; (b) the reasonableness of the rule; and (c) the employee’s violation of the rule.

Applying these standards, the Commonwealth Court determined that there was sufficient evidence to support a finding that Ms. Jungclaus did not violate the social media policy because she did not explicitly “identify” herself as an employee of Waverly Heights—even though a Google search of Ms. Jungclaus’s name would reveal that she worked there. Furthermore, the Court concluded there was no evidence of “wanton and willful disregard of an employer’s interests” because there was no actual evidence that Ms. Jungclaus polled African-American employees about their political preferences.  The Court found that mere discussions of current affairs did not rise to the level of willful misconduct.

Importantly, the Court reviewed only whether Ms. Jungclaus was entitled to unemployment compensation benefits. The Court was not asked to consider whether the termination itself was unlawful.

The Obama-era National Labor Relations Board (“NLRB”) frequently concluded that overly broad social media policies could have a chilling effect on unionized and non-unionized employee rights to engage in concerted activities under the National Labor Relations Act (“NLRA”).  As we mentioned in a post earlier this year, the U.S. Court of Appeals for the Second Circuit ruled that an employee’s social media post cursing at a supervisor and his family, made during a union election, was protected activity under the NLRA, and the employee could not be terminated for it. It remains to be seen how the Trump NLRB will interpret and enforce social media policies.

The primary lesson for employers? Unless an employer can affirmatively establish that a terminated employee engaged in willful misconduct or is ineligible for benefits due to other disqualifying reasons, then the terminated employee likely will be entitled to unemployment compensation benefits. Further, when making an employment decision based on an employee’s social media post, tread carefully. At least for unemployment purposes, it is likely that state labor departments and the courts will not find such comments to rise to the level of willful misconduct. Additionally, depending on the content and context of the post, the NLRB may find the post to be a lawful concerted activity protected by the NLRA.

Lee E. Tankle