Federal labor ruling gives boost to franchise workers
‘Joint employer’ standard could have broad impact
A landmark federal labor ruling on Thursday vastly expanded the definition of corporate employee and could end the arms-length relationship that companies like McDonald’s have historically had with their franchisees’ employees.
With its ruling in a case involving Browning-Ferris Industries and employees at one of its subcontractors, the National Labor Relations Board redefined what it means to be a “joint employer.” The new standard is significant because corporations could be held liable for labor law violations by their subcontractors and could be forced to the bargaining table by unions seeking to organize the employees of a subcontractor or franchisee.
Business groups blasted the 3-2 ruling, calling it a “seismic shift” in the employer definition that could significantly alter the face of American businesses, while unions hailed a victory.
Wilma Liebman, a former NLRB chairwoman, said the decision is a win for workers because it expands the universe of companies that can be considered joint employers and a home run for unions that pushed for the joint-employer standard to be expanded.
“The employer can’t say ‘It’s the subcontractor’s responsibility,’ ” she said.
The far-reaching implications of the decision stem from a 2013 election petition by the Teamsters union, which sought to represent workers at a Browning-Ferris recycling facility in Milpitas, California. The workers were employed by Leadpoint Business Services, a subcontractor, to sort out recyclable items and clean the facility.
The petition triggered the question of whether Browning-Ferris and Leadpoint were joint employers. An NLRB regional director found that they were not joint employers because they did not share direct and immediate control over conditions of employment, such as hiring, firing and disciplining workers.
The union appealed the decision, which led to the five-member national board decision on Thursday. The ruling means that ballots cast in a union election will now be unsealed and counted.
Experts say the case will eventually be appealed and could reach the Supreme Court.
The ruling could have immediate ramifications for staffing agencies and companies that hire them, and cause a scramble as businesses seek to maintain the status quo through legislation and labor groups rally to push causes that include the Fight for $15 campaign.
International Franchise Association President Steve Caldeira criticized the ruling as a “tortured analysis” that will hurt small businesses and said the association and its allies will continue to ask Congress to intervene in preserving the established joint-employer standard.
The National Retail Federation said the decision unnecessarily blurs the distinctions between independent parties in a wide range of normal business-to-business relationships like franchising or subcontracting.
In its decision, the board said the old standard no longer kept pace with the current workforce, where the diversity of arrangements has significantly expanded. For example, in 2014, 2.87 million workers were employed through temporary agencies, compared with 1.1 million in 1990.
The board’s majority said it has a responsibility to adapt the standard to “encompass the full range of employment relationships.”
Under its former standard, a company was considered a joint employer if it had direct and immediate control over working conditions. In the new standard, a company is a joint employer if it exercises indirect control over working conditions or if it reserves the authority to do so.
Labor law experts say the board’s new joint-employer standard strengthens the general counsel’s case against McDonald’s.
“McDonald’s is the boss – that’s true by any standard,” Kendall Fells, organizing director of Fight for $15, said in a statement. “The company controls everything from the speed of the drive-thru to the way workers fold customers’ bags. It’s common sense that McDonald’s should be held accountable for the rights of workers at its franchised stores.”
McDonald’s said in a statement that the ruling pertains to Browning-Ferris and its subcontractors, not McDonald’s.
“At McDonald’s, we do not direct or co-determine the hiring, firing, wage rates, hours, or any other terms of employment of our franchisees’ employees – which are the well-established criteria governing the definition of a ‘joint employer,’ ” said an emailed statement from McDonald’s spokeswoman Lisa McComb.