Employment Law Daily Citing inspector general determination that Emanuel should have recused himself, NLRB vacates Hy-Brand
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Wednesday, February 28, 2018

Citing inspector general determination that Emanuel should have recused himself, NLRB vacates Hy-Brand

By Lisa Milam-Perez, J.D.

On February 26, the NLRB vacated its decision in Hy-Brand Industrial Contractors, Ltd., in which a 3-2 Board overturned the agency’s controversial “joint employer” ruling in Browning-Ferris Industries. The move came after the NLRB inspector general determined that new Board member William Emanuel was disqualified from participating in the case and should have recused himself from the proceeding. As a result of the decision to vacate Hy-Brand, the vexing 2015 Browning-Ferris decision still stands—for now.

Obama Board’s standard. In Browning-Ferris Industries of California, Inc. a divided Obama NLRB scrapped a decades-old standard for determining whether two separate entities are the “joint employer” of a given group of employees. Under the new test, a business entity could be deemed a joint employer if it retained “potential” or “indirect” control over another entity’s employees—regardless of whether it actually exercised such control. The decision alarmed employers and posed considerable risk to the franchise industry in particular, as well as to companies with operations that rely heavily on staffing agency labor and other contingent worker models. In addition to drawing considerable fire from the business community, Browning-Ferris faced the ire of Congressional Republicans, who quickly set about efforts to reverse the much-maligned decision legislatively.

Trump Board’s replacement. With its brief window closing on an intact Republican majority (with Chairman Philip Miscimarra’s imminent departure looming), the Board issued several consequential decisions reversing some of the Obama Board’s most controversial and far-reaching rulings, not the least of which was Hy-Brand. In the Hy-Brand case, the Trump Board overruled Browning-Ferris in a lengthy opinion articulating why the 2015 decision was legally infirm and unwise as a matter of policy—largely tracing the reasoning of Member Miscimarra’s Browning-Ferris dissent. It reinstated the Board’s traditional joint-employer test, which requires that, for an entity to be considered a joint employer of another entity’s workers, it must exercise actual and direct control over the essential terms and conditions of employment for those workers. It’s not enough to merely reserve the potential to exercise such control. (At the Board’s request, moreover, the D.C. Circuit quickly remanded Browning-Ferris, which had been pending before it, back to the Board in light of Hy-Brand.).

Recusal necessary? Hy-Brand was eagerly welcomed by the employer community, but the decision was soon marred by procedural concerns over whether NLRB Member William Emanuel should have participated. A former Littler Mendelson attorney, Emanuel had agreed to recuse himself from any cases involving clients of his former law firm. The thorny problem for Emanuel and the rest of the Board was that in Browning-Ferris, the Obama Board found that Browning-Ferris was a joint employer with Leadpoint, a party represented by Emanuel’s former law firm.

Consequently, NLRB Inspector General David Berry took up the matter, investigating whether Emanuel should have participated in Hy-Brand or in the Board’s related decision to pursue remand of Browning-Ferris. On February 9, Berry issued a Memorandum to the Board (released on February 21) announcing his determination that Hy-Brand and Browning-Ferris were “the same ‘particular matter involving specific parties.’”

No longer separate cases. Although the two cases had started out as two distinct and separate matters, “the manner in which the former Chairman marshaled Hy-Brand through the Board’s deliberative process effectively resulted in a consolidation of the two matters into one ‘particular matter involving specific parties,’” he wrote, essentially providing a “do over” for the Browning-Ferris parties. He pointed to the “wholesale incorporation of the dissent in Browning-Ferris into the Hy-Brand majority decision,” which, he concluded, effectively consolidated the two cases. The Browning-Ferris dissent had been the product of the Board’s deliberative process, which included weighing briefs by the parties, which had included a client of Emanuel’s former law firm.

Hy-Brand vacated. In light of the inspector general’s determination that Emanuel is (and should have previously been) disqualified from participating in the Hy-Brand proceeding, a 3-0 member NLRB panel vacated its Hy-Brand decision in a February 26 order granting a motion for “reconsideration, recusal, and to strike” brought by the charging parties. (Emanuel recused himself, taking no part in the decision to do so.) As a result, “the overruling of the Board’s decision in Browning-Ferris Industries, set forth therein is of no force or effect.”

As a procedural matter, the decision to vacate Hy-Brand appears sound. The outcome is problematic for employers, however. Even when revisited by a five-member Board (once nominee John F. Ring is confirmed and assumes his seat), Emanuel’s continued recusal means the case will likely end in a 2-2 decision. Employers will probably have to wait for another ripe joint-employer case to percolate up to the Republican Board—a case in which Emanuel can participate—before Browning-Ferris finally meets its inevitable demise.

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