NLRB Poised to Reverse Course on Work Rules, Joint Employer Status and Mandatory Arbitration Agreements

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As we discussed in our August 13, 2021 E-lert, the first official memo issued by General Counsel Jennifer Abruzzo for the National Labor Relations Board set forth a laundry list of issues that she intended to address – many of which impact all employers, whether unionized or not. Many of these issues involve employer-friendly standards that were established in cases decided by the Trump Board. This month, the Biden Board took steps on three of those issues by inviting interested parties to submit briefs regarding the following: (1) the appropriate standard for analyzing facially neutral work rules; (2) independent contractor status; and (3) confidentiality requirements in mandatory arbitration agreements.

Work Rules Standard. The current Boeing standard divides facially neutral work rules into three categories: whether they (1) are lawful, (2) warrant individualized scrutiny, or (3) are unlawful. In its invitation for briefs, the Board identified particular questions to be addressed: whether to adhere to the existing standard; whether the Board should modify the standard to better account for employees’ economic dependence on their employers and the related potential for work rules to chill their rights to engage in protected concerted activity (PCA) regarding the terms and conditions of employment, as well as the burden of proof and the balancing of employer/employee interests; and whether the Board should continue to hold that certain categories of work rules (e.g. investigative-confidentiality, non-disparagement, prohibition of outside employment) are always lawful. We predict that the now-Democrat majority Board will take this opportunity to return to a more onerous standard that will find attenuated interpretations of reasonable work rules to violate the National Labor Relations Act.

Independent Contractor Status. For decades, the Board had relied on a common-law test to determine whether an individual is an employee, who is subject to the National Labor Relations Act, or an independent contractor, who is not. Under this test, a number of factors are evaluated:

  • Extent of control by the employer, with greater control over the manner and means by which the individual does business indicating employee status
  • Method of payment, as employers do not typically share the opportunity for profit or loss with independent contractors
  • Instrumentalities, tools, and place of work, as those are typically provided by employers to employees but not to independent contractors
  • Supervision, as independent contractors are not generally supervised
  • The relationship the parties believed they created
  • Engagement in a distinct business/work as part of the employer’s regular business/the principal’s business, since the more integrated the worker’s services are into the employer’s business, the more likely the worker is an employee
  • Length of employment, with a longer relationship indicating employee status
  • Skills required, with specialized skills or training indicating independent contractor status

“An important animating principle” under which the factors are evaluated is “whether the position presents the opportunities and risks inherent in entrepreneurism.” In the 2014 case of FedEx Home Delivery, however, the Obama Board revamped the independent contractor analysis and severely limited the significance of a worker’s entrepreneurial opportunity. The Trump Board, in SuperShuttle DFW, Inc., reinstated the prior standard, with its focus on entrepreneurism.

Now, the Board is questioning whether to adhere to the SuperShuttle standard, or return to the FedEx Home Delivery standard (or some variation thereof). We believe the Board will choose the latter option, which makes it harder to establish independent contractor status and favors a finding of employee status, with the consequent protections of the NLRA.

Confidentiality Clauses in Mandatory Arbitration Agreements. The Trump Board found that the Federal Arbitration Act absolutely protects employers’ ability to include confidentiality clauses in mandatory arbitration agreements. The Board now inquires whether the FAA does offer such protection, even where such clauses would interfere with employees’ rights to engage in PCA, and, if not, what standard it should apply to determine if such clauses are lawful. The Board also questions whether confidentiality clauses in mandatory arbitration agreements violate employees’ rights under the NLRA, including their ability to file Board charges or access Board processes. Again, we predict that the Board will now find the FAA does not protect such clauses, and that such clauses violate employees’ rights under the Act – meaning that employers would no longer be able to include confidentiality provisions in mandatory arbitration agreements.