Monday, December 18, 2017

NLRB restores sanity to its rules on employee handbooks and joint employment

Last week, the NLRB started making good on its promise to roll back some of its more controversial Obama-era reforms—its assault on employee handbooks and its liberalization of joint employment.

Employee Handbooks

If you’ve been reading this blog for any length of time, you are well aware of the NLRB’s assault over the past few years on garden-variety and facially neutral employee handbook policies. For the uninitiated, the Board, over scathing dissents by its more reasonable members and scorching critiques from business groups, applied its longstanding Lutheran Heritage rule to find that a variety of employment policies violate employees’ rights to engage in protected concerted activity under section 7 of the National Labor Relations Act. Lutheran Heritage asked if an employee would “reasonably construe” a work rule to infringe on their right engage in protected concerted activity. The benign policies it found unlawful ranged from confidentiality, to insubordination, to the use of company logos, to photography bans, and to conflict-of-interest rules. Over the past few years, the Board’s Lutheran Heritage test has led to some pretty crazed results.

Lutheran Heritage is now history. In Boeing Co. [pdf], the Board scrapped its 13-year-old “reasonably construe” test and replaced it with the following:
In cases in which one or more facially neutral policies, rules, or handbook provisions are at issue that, when reasonably interpreted, would potentially interfere with Section 7 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 requirement(s). …  
We emphasize that the Board will conduct this evaluation, consistent with the Board’s “duty to strike the proper balance between … asserted business justifications and the invasion of employee rights in light of the Act and its policy,” focusing on the perspective of employees.…

In striking this balance, and to provide clarity and certainty to employees, employers, and unions, the Board delineated three categories of employment policies, rules and handbook provisions:
  • Category 1 — rules that the Board designates as lawful to maintain, either because (i) the rule, when reasonably interpreted, does not prohibit or interfere with the exercise of NLRA rights; or (ii) the potential adverse impact on protected rights is outweighed by justifications associated with the rule. Examples of Category 1 rules are no-camera requirements, rules that maintain “harmonious interactions and relationships,” and other rules requiring employees to abide by basic standards of civility. 
  • Category 2 — rules that warrant individualized scrutiny in each case as to whether the rule would prohibit or interfere with NLRA rights, and if so, whether any adverse impact on NLRA-protected conduct is outweighed by legitimate justifications. 
  • Category 3 — rules that the Board will designate as unlawful to maintain because they would prohibit or limit NLRA-protected conduct, and the adverse impact on NLRA rights is not outweighed by justifications associated with the rule. An example of a Category 3 rule would be a rule that prohibits employees from discussing wages or benefits with one another. 
The Board applied its new rule to conclude that Boeing’s facially neutral “no-camera” policy did not violate its employees’ section 7 rights.

Joint Employment

In the NLRB’s other newsworthy decision last week, it overturned its liberalized joint employment standard announced two years ago in Browning-Ferris Industries of Calif. 

That decision overturned decades of precedent, and held that one does not only qualify as a joint employer by exercising actual control over the employees of another, but also by exercising indirect control or potential control. Many (including me) feared that if this standard survived judicial scrutiny, it could prove fatal to many small businesses, including franchisees.

That risk, however, is no more. In Hy-Brand Industrial Contractors, Ltd. [pdf], the NLRB expressly overturned Browning-Ferris:
[W]e overrule Browning-Ferris and restore the joint-employer standard that existed prior to the Browning-Ferris decision. Thus, a finding of joint-employer status requires proof that the alleged joint-employer entities have actually 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.”

Ironically, the Board concluded that two employers at issue in the case — a contractor and its sub — were joint employers because the general contractor exercised actual control over the essential employment terms of its sub’s employees.


These two issues were the bane of well-intentioned employers for the past few years. Boeing and Hy-Brand will make it significantly easier moving forward for all employers to manage their businesses via well-reasoned, facially neutral work rules, and via arms’-length dealings with other employers.

Better yet, call your friendly neighborhood labor and employment lawyer to walk you through how these legal changes impact your handbook, work rules, and other policies, and your contracts with other employers.