In a post on 24th August we commented on how a case before the US National Labor Relations Board (NLRB – a body that rules on disputes between labor and management) threatened to undermine the structure of at least parts of the service industry as it has evolved over the past few decades by changing the definition of what constitutes joint employment. This was a case brought by the Teamsters Union seeking to organize contract workers of staffing agency Leadpoint Business Services against Republic Services subsidiary Browning-Ferris, which operates a recycling plant in California. The union argued that Republic should be considered a joint employer, with all that implies for workers’ pay, benefits and other working conditions as well as employer related risks, arguing that Leadpoint’s supervisors act in a chain of authority controlled by Republic.
On 27th August the NLRB in a 3-2 decision ruled that the existing standard that said companies only qualify as “joint employers” of workers hired by another business if they had “direct and immediate” control over employment matters was outdated and did not reflect the realities of the 21st century workforce. The ruling said parent companies can be held liable for labor violations committed by franchisees and contractors even when they have only indirect control. It is expected to impact a broad range of U.S. industries built on franchising and contract labor, from fast food and hospitality to security and construction.
According to Reuters:
Business groups and lawyers strongly criticized the ruling, saying it would force companies to the bargaining table even when they have little say over working conditions.
“The NLRB’s actions today will subject employers to increased uncertainty, liability for workplaces that they don’t actually control, and ramped up pressure tactics to ease union organizing,” said Glenn Spencer, a vice president at the U.S. Chamber of Commerce.
The decision could also make it easier for unions and workers to win higher wages and better working conditions since they would be negotiating directly with parent companies.
Business groups have said such a ruling, which came in the case of waste management company Browning-Ferris Industries Inc, would endanger companies that rely on franchising, contracting and supply chains, and kill jobs.
Michael Lotito, a lawyer at Littler Mendelson in San Francisco who works with industry groups, said companies will have two main options moving forward: take more control over workers, which would upend existing business models, or back away and risk losing control over brand identity.
“The NLRB has totally upset the apple cart with respect to an understanding over accepted business risk,” he said.
If it stands, the ruling is likely to have a direct impact on a series of pending NLRB cases against McDonald’s Corp and dozens of its franchisees around the country. The fast food giant has argued that it is not a joint employer because it does not hire and fire franchise workers, and Thursday’s decision may complicate the company’s argument.
Unions and others who support the change say the decision is necessary to bring companies that indirectly control working conditions to the bargaining table, and to curb the use of “permanent temps” who are paid less and do not get the same benefits as ordinary employees.
The ruling also means franchises and smaller companies that provide workers will be insulated from liability when labor violations are triggered by corporate policies, said Jeanne Mirer, a lawyer who authored a brief in the case on behalf of the Communication Workers of America and workers’ rights groups.
“Now the arrangement can be put back into balance in a way that gives fuller protections to workers and the leased company,” she said.
How this plays out now will have serious repercussions on virtually all businesses using and providing contract labor. Eventually this will also influence the situation in Europe and beyond.
Here is also a related article by Bloomberg