Controversial NLRB Ruling Could End Contract Employment As We Know It - Forbes

 

The National Labor Relations Board, as expected, determined that Browning-Ferris Industries is a “joint employer” obligated to negotiate with the Teamsters union over  workers supplied by a contract staffing firm within one of its recycling plants.

In so doing, the board’s Democratic majority reversed several decades of practice where companies had to exercise “direct and immediate” control over workers with a new regime in which regulators will examine each case for signs a company has the potential to affect pay and working conditions. It will have a large impact on how franchisers like McDonald MCD +0.00% do business, since they can potentially be held liable for hiring and firing decisions by any of their thousands of individual franchisees. Even routine business decisions, like whether to fire a contractor or how to structure operations, will now be examined in light of how they affect union organizing efforts.

“If this goes into effect then the franchiser has to step in and have a standard for hiring, human resources, payroll, everything,” said Jania Bailey, a board member of the International Franchise Association and chief executive of FranNet, a consulting firm that matches franchisees and franchisors. “It basically nullifies this independent business model.”

The decision by the board’s three Democratic appointees was fiercely disputed by the Republican minority, who said it reverses several prior decisions that established a clear standard for whether a company is an employer, all of which had been approved by powerful federal courts of appeal.

Under the board’s new standard — which the majority, to be clear, maintains is the old standard, revived — the test is whether a company has the potential to exercise control over a worker’s wages and working conditions, regardless of whether that control is used. That potential can be based on the economic power in the relationship, which unions argue can limit the ability of a contractor to raise wages, as well as modern technology allowing franchisers to monitor the productivity and output of employees at franchisees.

The majority board members, led by Chairman Mark Gaston Pierce, a former union lawyer, said they they were merely returning to the standard established under a 1982 decision by the Third Circuit Court of Appeals, also involving Browning-Ferris, which the board subsequently tightened “without explanation.” The additional requirements overturned today “significantly and unjustifiably narrow the circumstances where a joint-employment relationship can be found” and leave the board “increasingly out of step with changing economic circumstances,” the majority said. Key among the requirements was that a joint employer exercise “direct and immediate” control over workers.

Controversial NLRB Ruling Could End Contract Employment As We Know It - Forbes