Joint Employers

In a major victory against the obscuring of employers in order to disempower workers, the National Labor Relations Board has ruled that corporations who use contractors and franchises are the joint employers of those workers. This is an enormously important decision because employers like the fast food industry (the case is actually about a waste management company but fast food is the most famous user of this method) argue that if workers were to join unions, they would have to negotiate with each individual restaurant instead of with McDonald’s. The big companies control almost everything about the work, but used these obscuring methods as a way to shield themselves from liability. The NLRB just stripped a lot of that way and undermined some of the reasons for subcontracting and franchising.

In the case, the N.L.R.B. held that a company called Browning-Ferris Industries of California was a joint employer of workers hired by a contractor to help staff the company’s recycling center. But the ruling could apply well beyond companies that rely on contractors and staffing agencies, extending to companies with large numbers of franchisees.

“The decision today could be one of the more significant by the N.L.R.B. in the last 35 years,” said Marshall Babson, a lawyer who helped write the brief for the U.S. Chamber of Commerce in the case and who was a Democratic appointee to the labor board in Ronald Reagan’s presidency. “ Depending on how the board applies its new ‘indirect test,’ it will likely ensnare an ever-widening circle of employers and bargaining relationships.”

Beyond Browning-Ferris, the ruling may have a significant immediate effect on a case the labor board is litigating against McDonald’s and several of its franchisees. In that case, the N.L.R.B.’s general counsel, who essentially acts as a prosecutor, asserts that the company is a joint employer along with a number of franchisees, making it potentially liable for numerous reported violations of workers’ rights, like retaliating against those who have tried to organize unions.

Thursday’s N.L.R.B. ruling, by enshrining a broader joint-employer definition into doctrine, makes it more likely to apply in the McDonald’s case as well, though experts point out that joint employer designations are typically very dependent on the circumstances of each case.

Business representatives said the ruling could make it much harder to operate franchises in the future, undermining a popular path for many entrepreneurs.

“This will clearly jeopardize small employers and the future viability of the franchise model,” said Steve Caldeira, president of the International Franchise Association, an industry group. “If I’m an existing and/or aspiring franchisee, why would I want to expand my business and/or get into franchising if I don’t have the ability to run the day-to-day operations of the business?”

The industry pretending that the franchisee controls the business is hilarious given how much control the company holds over the entire operation.

Some credit goes to the Teamsters here who brought the case before the NLRB and this demonstrates how important it could be to unionization efforts:

The Browning Ferris case grew out of an organizing effort by the Teamsters. The union sought to have the waste management company named as a joint employer for workers employed by the staffing firm Leadpoint Business Services, a subcontractor for Browning Ferris. If Browning Ferris were deemed a joint employer, it would have to join Leadpoint in bargaining with the Teamsters. Such a determination could also make it easier for the Teamsters to organize workers at other staffing agencies that do work for Browning Ferris.

A regional director for the NLRB ruled that Browning Ferris did not exert enough control over Leadpoint workers to be considered a joint employer under current standards, but the Teamsters appealed that ruling to the federal board. Thursday’s ruling will change those standards for future cases.