People

Potential US ruling on joint employment may impact employees and service businesses

A case before the US National Labor Relations Board (NLRB – a body that rules on disputes between labor and management) threatens to undermine the structure of at least parts of the service industry as it has evolved over the past few decades (i.e. as we know it).

The Teamsters Union (a large labor union in US representing mainly blue-collar and professional workers with approx. 1.3 mill. members) is attempting to organize employees of Leadpoint Business Services, a manpower services supplier, providing staff for a recycling plant in California on behalf of Republic Services, a large waste management company. The union however has petitioned the Board to treat Republic as an employer as well, arguing that Leadpoint’s supervisors act in a chain of authority controlled by Republic. At least three of the five members of NLRB are expected to side with the union.

The implications are significant (though Republic can appeal the decision) and could affect sectors such as contracting, outsourcing or even franchising. Under the current US standard for determining “joint employment” each company must be involved in hiring, firing, discipline, supervision and direction of employees. Responsibility must be direct and immediate. The dispute however turns on what is the right definition for employment. NLRB’s own general counsel has stated that the current definition should be abandoned and the adoption of a new standard that takes into account the totality of the circumstances, including how the putative joint employers structured their commercial dealing with each other. It says that the way the current standard treats (sub-) contracting (and franchises) undermines the ability of workers to bargain for better wages, hours and working conditions.

If this change were to be adopted, businesses could find themselves responsible for people who provide them with services but whom they do not manage – e.g. employees on outsourced contracts for almost any type of services from maintenance and manufacturing operations to facilities management, construction, logistics, cleaning and waste collection as long as they are working for a period of time at a host site (while this dispute involves a staffing agency, it is not clear how it would affect other services providers involving personnel). Apart from assorted risks (they could be exposed to strikes and other labor strife prompted by the actions of companies other than their own), they would also possibly lose the ability to choose between competing service providers and could come under pressure to integrate vertically reversing a major trend – with all the inefficiency that may entail for their own operations and lost opportunity for others.

Both sides in this dispute have legitimate claims and it will be interesting to see whether it will be possible to strike a balance between protecting and enhancing workers’ rights without undermining operating efficiency which might result in fewer jobs overall.

For those interested accounts of the situation in US and European jurisdictions can be found in a paper by Guy Davidow (ILO website), and in Australia in a paper by Corrs, Chambers, Westgarth

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