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Employers now seek to vacate NLRB’s Hy-Brand vacatur ruling

By Pamela Wolf, J.D.

In the continuing saga over efforts to rid the employer community of the Obama-era joint-employer standard established in the NLRB’s August 2015 Browning-Ferris case, the employers in the now-vacated December 2017 Hy-Brand Industrial Contractors decision, which overturned Browning-Ferris, are seeking reconsideration asserting that the vacatur infringed upon their rights to due process and that Member William Emanuel should not have been excluded, among other things.

In Browning-Ferris, a divided Obama-era Board 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 concern 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 fire from the business community, Browning-Ferris raised the ire of Congressional Republicans, who quickly set about efforts to reverse the much-maligned decision legislatively.

Hy-Brand vacated over ethics questions. Although Hy-Brand had overruled Browning-Ferris and returned the joint-employer standard to its earlier version, on February 26, 2018, the Board vacated Hy-Brand, which had been issued during a narrow window of a Republican majority on the Board. The move followed an NLRB inspector general’s report finding that Member Emanuel should not have participated in the decision due to his former law firm’s representation of one of the parties in Browning-Ferris. Hy-Brand amounted to a “do-over” for the Browning-Ferris parties, according to the report. As such, Emanuel had a conflict of interest that should have kept him from participating in the Hy-Brand case. As it stands today, the Browning-Ferris standard once again determines joint-employment cases before the Board.

Whole Board must participate. The respondents cite several reasons why the Hy-Brand vacatur should be reconsidered, including that the creation of the vacatur panel and its reliance on various non-record considerations “is fundamentally flawed.” Among other things, Board Member William Emanuel should not have been excluded from the vacatur decision, according to the employers.

Citing the Supreme Court’s January 2014 NLRB v. Noel Canning ruling, the Hy-Brand respondents argue that NLRA Section 3(b), 29 U.S.C. §153(b), “means what it says: ‘It is undisputed that the first sentence of this provision authorized the Board to delegate its powers to a three-member group … “’ Under Section 3(b), the respondents stressed, ‘The Board is authorized to delegate to any group of three or more members any or all of the powers which it may itself exercise.’ The respondents take this to mean that all sitting members “must vote to authorize delegation of authority to a three-member panel to act and decide on its behalf.”

They argue that the Act does not permit, as occurred in the Hy-Brand vacatur, three Board members out of four to prevent other Members from voting on delegation of the “Board’s” authority to a panel, according to the respondents. At the time of the vacatur order, the Board was comprised on four Members that included William Emanuel, and there can be no delegation of authority by the “Board” unless all Members participate. “To claim otherwise, is to allow any three members of the Board to highjack the authority of the other members to participate in the decision to delegate or not to delegate decisionmaking to a panel,” the Hy-Brand employers wrote.

No public notice. In addition, the Hy-Brand vacatur ruling violates the Government in Sunshine Act, the respondents assert. There was no calendared session after the initial December 14, 2017, decision in the case. Thus, when the three-Member panel met, apparently in secret, to consider vacatur, it violated Sunshine Act notice provisions. The Act requires at least one weeks’ notice when the Board will hold a meeting during which it will determine or dispose of official agency business, according to the employers.

Other problems. The respondents also argue that the inspector general’s report contains no legal analysis and that the inspector general lacks authority to issue an ethics decision involving a President Trump’s Executive Order 13770 (executive branch appointees’ ethics pledge), and should not have revealed the confidential deliberative processes involving the respondents’ interests. They also charge Member Mark Gaston Pearce with misconduct for revealing in advance that the vacatur decision would be issued when he was speaking before the ABA Section on Employment and Labor’s Mid-Winter meeting in Puerto Rico on February 25, 2018.

Moreover, the vacatur panel purportedly obliterated the employers’ rights to due process when Senator Patty Murray (D-Wash.) reported that another inspector general report is pending publication, information that was obtained through leaks or other improper communications with Board employees.

For these and other reasons, the Hy-Brand respondents argue that the February 26 vacatur decision should itself be vacated and the December 14, 2017, initial ruling reinstated. They also contend that there should be an investigation into the improper disclosures and the record should be kept open to take addition evidence.