- Written by Michael C. Saqui & Gregory Blueford
In a much expected 3-2 decision, the National Labor Relations Board (“NLRB”) yesterday finally overruled the Board’s much-derided 2015 decision in Browning-Ferris Industries, 362 NLRB No. 186 (2015) (“Browning-Ferris”), that allowed for a finding of joint employment based upon a showing of “indirect control” or the ability to exert such control. Instead, the Board returned to the principles governing joint-employer status that existed prior to Browning-Ferris. Under the prior standard, in order to find joint employment, there must be a showing of “direct and immediate control” of the terms and conditions of employment.
The case involved Hy-Brand Industrial Contractors, Ltd. (“Hy-Brand”), a general contractor, and Brandt Construction Co., which performs public works such as highway building. The evidence presented in the case established that Brandt did in fact exert control over the terms and conditions of workers’ employment. However, the Board in finding that the companies were joint employers, rejected the Browning-Ferris standard adopted by the Board during the Obama Administration and instead applied the former “direct and immediate control” standard.
In overturning the Browning-Ferris standard, NLRB Chair Philip Miscimarra, who was appointed to the Chair by President Trump, explained that the standard is a “distortion of common law,” is contrary to the NLRA, is ill-advised as a matter of policy and prevents the Board from fostering stability in labor-management relations. While noting that the Browning-Ferris test might have been well-intentioned, the Board, among other things, decided that the previous decision abandoned a longstanding test that provided certainty and predictability and replaced it with a vague and ill-defined standard based solely on a right to exercise “indirect control”, which had to be determined on a case-by-case basis. The Board held that the prior “direct and immediate” standard was a superior standard.
COUNSEL TO MANAGEMENT:
This is a massive win for employers across the nation and one that was expected and hoped for under President Trump’s pro-employer administration. With the Board being filled by a majority of Republican appointees, Browning-Ferris appears to be dead. Going forward, two or more entities will be deemed joint employers under the National Labor Relations Act (NLRA) only if there is proof that one entity has exercised control over the essential employment terms of another entity’s employees and has done so directly and immediately (rather than indirectly) in a manner that is not limited and routine. We will provide updates as the fall-out from this decision continues in the coming weeks and months. Please contact The Saqui Law Group with any questions your Company has regarding joint employer liability.
- Written by Rebecca Hause-Schultz
As we previously reported here, Prudential Overall Supply (“Prudential”) filed a petition with the Supreme Court of the United States (“SCOTUS”) seeking a review of an unfavorable decision denying Prudential’s ability to force arbitration on an employee’s claims under the Private Attorneys General Act (“PAGA”).
In that case, Prudential was sued by a former employee for alleged failure to pay overtime and denying meal and rest breaks under state labor statutes and PAGA. The PAGA is a powerful tool for Plaintiffs, as it allows an “aggrieved employee” to step into the shoes of the Attorney General and seek penalties on behalf of the state against the Company. In a PAGA action, an employee will recover only 25% of the total PAGA award, but employees oftentimes pursue parallel individual or class claims in addition to claims under PAGA.
Prudential petitioned to have the PAGA claim moved to arbitration, as the employee had signed an arbitration agreement when he was hired. The Fourth Appellate District found that the State of California was not bound by an arbitration agreement between an employee and employer. Thus, the court could not force the employee to arbitrate PAGA claims he was bringing on behalf of the state.
In August, Prudential asked the SCOTUS to hear the case, arguing that the appellate court got the decision wrong. Prudential claims the appellate court ignored the Federal Arbitration Act (“FAA”), a federal law that favors the use of arbitration agreements and which Prudential argues preempts the PAGA. Unfortunately, the SCOTUS denied Prudential’s request and will not hear the case.
COUNSEL TO MANAGEMENT:
Until the preemption issue gets resolved, the law for California employers is that PAGA claims cannot be forced into arbitration. However, it is still important to note that arbitration agreements remain a powerful tool in the litigator’s tool belt. Companies should not let decisions like this make them shy away from arbitration agreements in their entirety. Employers with questions regarding arbitration agreements should contact the experts at The Saqui Law Group.