Last week, the National Labor Relations Board announced that it will no longer use the Browning-Ferris joint-employer test. If you don’t have a union, why should you care? This is the test that many courts consider when determining just who employed (and is therefore responsible for) an employee who is suing for any number of reasons.

What Was the Browning-Ferris Test?

Alas, Browning-Ferris, We Barely Knew You: NLRB Rejects Its Own Recently Adopted Joint-Employer TestYou may recall that about a year ago, in Browning-Ferris Industries of California v. NLRB, et al., the NLRB implemented an unprecedented expansion of its joint-employer test. When two or more businesses share control over a worker’s terms of employment, the NLRB (and others) often need to determine who that employee’s actual employer is. The Browning-Ferris decision came up with an indirect control test in which a business with little, if any, control over an employee could qualify as the employer, resulting in many more joint-employer relationships. All that the indirect control standard required was that the entities in question be “employers” under common law precedent and share or codetermine matters regarding the employee’s terms and conditions of employment. The Browning-Ferris decision was met with much controversy, but the opposition can now rest easy, because the NLRB has restored its former joint-employer standard.

What is the Current Standard?

The original (and now current) standard focuses on the degree of direct and immediate control by employers. The test requires direct and immediate control over the essential terms and conditions of employment, such as hiring, firing, and disciplining employees. In a press release, the NLRB stated the following:

In all future and pending cases, two or more entities will be deemed joint employers under the National Labor Relations Act (NLRA) if there is proof that one entity has exercised 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. Accordingly, under the pre–Browning Ferris standard restored today, proof of indirect control, contractually-reserved control that has never been exercised, or control that is limited and routine will not be sufficient to establish a joint-employer relationship.

Takeaways

This is good news for employers, as it is now harder for a worker to claim that more than one business is his or her employer. Not surprisingly, this decision is hotly contested by champions for unionization.

How can your company avoid joint-employer liability? Try some of these tips:

  1. Keep your human resources and payroll functions separate and independent.
  2. Maintain separate lines of supervision.
  3. Do not comingle equipment and resources unless all of the exchanges of such clearly are accounted for in some business fashion.
  4. Do not have one company and its C-suite governing the operation of a second company.
  5. Certainly maintain separate books and tax records.
  6. Keep brands separate.
  7. Take care of the obvious stuff, such as don’t use the same telephone number and switchboard.
  8. Use contracts, subcontracts, and consulting contracts to maintain arm’s length business obligations between the services of the companies.
  9. Maintain confidentiality of trade secrets and bidding information.
  10. Keep those union and nonunion workers as far from each other as possible.

Can you prevent employees from pursuing class actions if you have the right employment agreement? Employment agreements routinely include arbitration clauses that require employees to waive their right to pursue work-related claims through collective or class actions. Instead, employees agree to resolve disputes through individual arbitration. But the validity of these arbitration clauses is unclear and is now before the United States Supreme Court. The Supreme Court heard oral argument earlier this week in National Labor Relations Board v. Murphy Oil, USA, Inc. and two other consolidated cases about whether such clauses violate the National Labor Relations Act (which governs employer-employee relations) or whether the Federal Arbitration Act (which governs arbitration agreements) trumps the NLRA.

The cases that the Supreme Court is reviewing come out of the Fifth, Seventh and Ninth Circuit Courts of Appeal. The Fifth Circuit held that an employer lawfully enforced an arbitration clause in its employment agreement and did not violate the NLRA. The Seventh and Ninth Circuits held the opposite—finding similar arbitration clauses unenforceable because the NLRA prohibits class waivers in employment agreements.

Employment contract arbitration clauses are currently enforceable in the Second, Fifth, and Eighth Circuits (shown in green below) and unenforceable in the Seventh and Ninth Circuits (shown in red below).

Murphy’s Law: Will the Supreme Court End Employment Contract Arbitration Clauses?

Why Murphy Oil Matters

The Supreme Court’s decision in Murphy Oil is worth watching. If the Supreme Court holds that these arbitration clauses do not violate the NLRA (or that the FAA overrides the NLRA), employees who have signed such clauses will be required to litigate employment-related disputes on an individual basis before an arbitrator. Conversely, if the Supreme Court finds that these clauses violate the NLRA, employees can pursue lawsuits on a collective or class basis, notwithstanding an employment agreement that purportedly waives such rights.

How Best to Structure Arbitration Clauses

Employers can likely avoid these issues entirely with careful drafting of their employment agreements. In particular, if an employment agreement gives an employee the opportunity to “opt out” of the agreement (thus making the agreement voluntary, not mandatory), an arbitration clause and class action waiver is likely enforceable. An opt-out clause should clearly inform the employee of their right to opt out of arbitration and also require the employee to affirmatively notify their employer of their desire to opt out. Ironically, allowing employees the option to resolve employment-related disputes in arbitration may help defend a later challenge to the enforceability of the arbitration agreement if the employee had the option to “opt out” but chose not to do so.

The NLRB/EEOC Landmine – When Does Offensive Speech Amount to Protected Activity?Employers need to be on the lookout for instances of offensive employee speech, which may put them between a rock and a hard place as they navigate potential claims under either anti-discrimination laws or federal labor laws.

You have probably heard that Google terminated an employee earlier this month for saying (among other things) that gender inequality in the technology field resulted from biological differences. After James Damore (now former employee) circulated a lengthy written critique on the company’s diversity efforts, Google ended his employment. Google’s CEO sent a company-wide email announcing that Google terminated Damore because his statements violated the company’s code of conduct by “advancing harmful gender stereotypes in our workplace.”

Google’s response to the memo is not surprising. Over the last several years, the tech industry has faced increased scrutiny about gender inequality in the workforce. We have seen a handful of claims (both in and out of court) alleging sex discrimination and harassment in Silicon Valley. Ignoring for the moment the optics, workforce morale, and company culture potentially affected by Damore’s manifesto, the company acted to minimize its exposure under anti-discrimination laws. For example, if a female employee later sues Google for sex discrimination, Google can point to its hardline response as evidence that it is committed to the equal treatment of women in the workplace and does not tolerate attitudes to the contrary.

What Google may have failed to consider, however, are Damore’s potential claims under the National Labor Relations Act (NLRA), which protects employees’ rights to act together to improve pay and working conditions.

The day he was terminated, Damore filed a complaint with the National Labor Relations Board (NLRB), apparently claiming that his manifesto was protected activity and the company was trying to silence him by threatening his employment. (The actual complaint is not yet publicly available, but Damore has spoken out about it, and the NLRB site describes the nature of the complaint as “coercive statements.”) The day after Damore filed his NLRB complaint, the Eighth Circuit agreed with another NLRB order reinstating an employee terminated for making racial slurs to a group of African-American workers. Because that employee made the slurs during a nonviolent company strike, the Eighth Circuit held that he was participating in protected collective activity. Damore will likely point to the new Eighth Circuit opinion to support his NLRB complaint.

Whether offensive speech constitutes harassment is very fact-specific, as is whether an employee’s conduct amounts to protected concerted activity under the NLRA. Employers should always address instances of unprofessional or offensive comments, but they also need to be on the lookout for potential NLRB claims if the employee’s remarks reach a larger group of people (whether in person, in writing, or via social media).