Winston Churchill allegedly once said, “lovers of sausage and public policy should not watch either be made.” Recent events at the National Labor Relations Board call that apt quote to mind.
In its zeal to overturn Obama-era precedent, the Trump N.L.R.B. seems to have stepped right into it – creating confusion and uncertainty for manufacturers and others.
In December, I wrote that the N.L.R.B. had suddenly overturned several important decisions issued by the Obama-N.L.R.B. on narrow three-to-two partisan votes. One of those decisions addressed the circumstances under which two companies would be considered to be the “same employer” for traditional labor law purposes. In Hy-Brand Industries, the Board overturned the decision in Browning-Ferris Industries (which held that two employers could be considered to be the same employer when one exerted “indirect control” of labor relations on the other, even if that power was never exercised). The Board announced it was returning to the pre-Browning-Ferris test by which two companies would only be considered to be the same if one exhibited “direct and immediate control” over the employees of the related company. See “The Trump N.L.R.B. Gift Giving Season.”
On February 9, 2018, however, acting on a complaint filed by several unions and their counsel, the N.L.R.B.’s Inspector General issued a report finding that Board Member William Emanuel, one of the three Board Members in the Hy-Brand majority, should not have participated because his former law firm represented one of the parties on the losing-side in Browning-Ferris case. Inspector General’s Report. On February 26, a three-member panel of the N.L.R.B. issued an order withdrawing the decision in Hy-Brand and reinstating the Browning-Ferris “indirect control” test.
Unfortunately, this back-and-forth has achieved little but to plant confusion and uncertainty into matters critical to manufacturers. Whatever standard finally applies has real consequences for manufacturers. Manufacturers often have complex, negotiated arms-length agreements with suppliers, distributors, agents and others. Those relationships – already complex because of regulatory compliance and quality assurance demands – require the legal underpinnings of them to be certain, clear and understandable. Even now manufacturers are negotiating these agreements under a cloud of uncertain legal standards.
Unfortunately, the Board’s on-again, off-again decision making only promises more litigation for the foreseeable future.
Manufacturers currently negotiating agreements with up- or down-stream companies should confer with qualified legal counsel to assess the risks and benefits of their unique contracts.