In a long-awaited ruling, the National Labor Relations Board
on Thursday upheld a controversial shift in the standard for determining “joint
employer” status in a closely watched case that is expected to reverberate
through the franchising world.
The case involved Houston-based waste management firm
Browning-Ferris Industries, or BFI, and a union that attempted to organize
subcontracted workers at one of the firm’s recycling facilities. In the case,
NLRB general counsel Richard Griffin argued in a brief that the 30-year-old
standard for defining joint-employer status between a franchisor and
franchisee, or contractor and subcontractor, should be scrapped in favor of a
broader definition.
Griffin argued that a franchisor should be considered a
joint employer and could be held liable for the hiring practices of its
franchise operators.
Related
In the ruling Thursday, the NLRB agreed 3-to-2 that the
joint employer standard should be redefined, saying the previous definition
failed to keep pace with changes in the workplace and economic circumstances.
The new definition, the board said, would “better effectuate the purposes of
the act in the current economic landscape.”
Key in determining joint-employer status is an evaluation
of whether the larger entity possesses sufficient control over employees,
directly or indirectly through a third party, even if that control is not
exercised, the board said.
“We will no longer require that a joint employer not only
possess the authority to control employees’ terms and conditions of employment,
but also exercise that authority,” the ruling said. “Reserved authority to
control terms and conditions of employment, even if not exercised, is clearly
relevant to the joint-employment inquiry.”
Griffin’s definition was fundamental in a series of NLRB
complaints filed against McDonald’s USA LLC in December, including allegations
that worker rights were violated during minimum wage protests in recent years.
Earlier this month, the NLRB denied an effort by
McDonald’s to challenge the joint-employer definition, allowing the case to
proceed.
In the Browning-Ferris case, the NLRB ruled that the
waste management firm was a joint employer with Leadpoint, a company that
supplied temporary workers. In that case, BFI had indirect and direct control
over essential terms and conditions of employment, the board said.
The ruling was applauded in a statement by the Teamsters
Union, the union involved in organizing the recycling plant, which called the
decision a victory for workers across America.
“This decision will make a tremendous difference for workers’
rights on the job. Employers will no longer be able to shift responsibility for
their workers and hide behind loopholes to prevent workers from organizing or
engaging in collective bargaining,” said Jim Hoffa, Teamsters general
president.
Opponents of the new definition argue that it will likely
result in new collective bargaining obligations, and that unions will target
deeper pocketed franchisors, rather than the local operators when there is a
dispute.
In the lengthy dissenting opinion, board members Philip
Miscimarra and Harry Johnson wrote, “This change will subject countless
entities to unprecedented new joint-bargaining obligations that most do not
even know they have, to potential joint liability for unfair labor practices
and breaches of collective-bargaining agreements, and to economic protest
activity, including what have heretofore been unlawful secondary strikes,
boycotts and picketing.”
Labor attorneys agreed that the ruling will likely be a
boon to labor unions attempting to organize, particularly in the fast-food
industry.
“Anywhere there is a relationship between employers where
labor unions are looking to make organizing gains, those relationships are at
risk of being tested,” said Kurt Larkin, a partner in the labor and employment
division of law firm Hunton & Williams in Richmond, Va.
Larkin said the NLRB’s definition is likely to be
challenged in court. In the meantime, however, the new definition is likely to
be applied in a wide range of situations.
A business could potentially be considered a joint
employer with the janitorial company that cleans its offices at night, for
example, or a private equity firm could be considered in a joint-employment
situation along with a restaurant company investment, he said.
Angelo Amador, senior vice president of labor and
workforce policy and regulatory counsel for the National Restaurant
Association, said in a statement that “upending” the joint employer standard
will have “dire consequences” on franchisees’ decisions to grow and expand
their businesses.
“While we continue to review the NLRB ruling, it appears
that once again the board is stacking the deck against small business,” he
said.
“The board is overturning years of established law that
has worked to help grow business and feed our economy,” Amador continued. “The
NLRB is already using its new rationale to dismantle the franchisor-franchisee
model, which would stifle entrepreneurship and obstruct small businesses’
ability to continue to create jobs in an increasingly challenging economic and
regulatory environment.”
The International Franchise Association, which has been
lobbying to prevent a change in the joint employer definition, described the
ruling as politically motivated by organized labor, noting that the
long-awaited ruling came as Congress was on summer break.
“While Congress is away, the NLRB clearly still plays,”
said Steve Caldeira, president and CEO of the IFA, in a statement.
“The board ignored decades of judicial precedent and
bipartisan policy agreement dating back to the Johnson Administration to invent
new labor laws,” Caldeira said. “The Browning Ferris decision is proof that the
NLRB may target parties to any business contract in pursuit of their
ideological agenda of promoting unions above all else.”
The IFA argues that franchisees operate independently,
controlling their own hiring practices, working conditions, wages and hours of
operations and filing their own taxes.
The group has been pushing for legislation that would
codify the long-used definition of joint employer and usurp the new NLRB
standard.
“Today’s NLRB decision is a seismic shift in the board’s
employer definition and, without any Congressional or court action, could
significantly alter the face of American business as we know it,” Caldeira
said. “If allowed to go into effect, the impact of this new joint-employer rule
would be sweeping and widespread, create havoc for the franchise industry and,
ultimately, would inflict serious damage to our nation’s economy.”
Also opposed to the NLRB ruling is the National Council
of Chain Restaurants. Rob Green, NCCR’s executive director, described the
ruling in a statement as contrary to the realities of the 21st century economy
and American free enterprise.
“Chain restaurants are mostly small business franchisees
that operate independent restaurants in local communities around the country,”
said Green. “The NLRB is effectively telling these small business owners that
their personal business investments and the details of how they run their restaurants
don’t matter.”
Source: Nation’s
Restaurant News
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