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
"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.
The majority redefined the rule to include “reserved authority,” or the potential to control wages, discipline and working conditions, all typical grist for union negotiations.
Philip A. Miscimarra and Harry Johnson excoriated the majority in a 28-page dissent, saying the Democrats had ignored clear terms of the law exempting companies that use contractors from the definition of employer.
The Board is not Congress. It can only exercise the authority Congress has given it. In this instance, our colleagues have announced a new test of joint-employer status based on policy and economic interests that Congress has expressly prohibited the Board from considering.
The majority cited the main purpose of federal labor law as encouraging collective bargaining to "promote the peaceful settlement of industrial disputes." But by injecting new uncertainty into the process, the minority said, the rule may make it harder to get parties to the table. Potential “employers” will dicker over whether they need to bargain and unions will argue about who they want to drag to the table.
"When you have a standard like this, you don’t quite know what to guard against," said Ken Yerkes, chairman of the labor and employment practice with Barnes & Thornburg. Companies that thought they had entered into arms-length contracts with outside firms can find themselves dragged into labor disputes, while franchiser will have to consider whether they are liable for any actions taken by their franchisees. Looming over this rule is the board's prior decision to sue
"The Boeing specter over this cannot be overstated," Yerkes told me.
The new rules also will erode prohibitions on union practices like secondary strikes, boycotts and picketing. McDonald's already is fighting claims by the NLRB that it is liable for alleged labor-law violations by its independent franchisees, including disciplining workers who walked off the job as part of an unofficial nationwide strike.
In this case, BFI has a contract with Leadpoint to supply workers for several tasks including cleaning and sorting refuse inside the recycling plant. That contract can be terminated by either party within 30 days, and states that Leadpoint is the sole employer and should not assign workers to BFI for more than six months (though that clause has not been invoked). The two companies keep separate supervisors and lead workers at the facility, along with separate human-resources departments. Leadpoint managers meet with BFI three times per quarter to evaluate performance.
The union argued BFI controlled wages because Leadpoint agreed not to exceed BFI's own wages and simply passed the cost through with a markup. The union also presented evidence BFI had a hand in discipline, because it complained about Leadpoint employees drinking whiskey on the site and about video evidence of a Leadpoint employee destroying a BFI paperwork box.
The union argued BFI controls “essential terms and conditions of employment” including qualifications, work hours, breaks, work rules and the speed of the lines.”
The dissenters said "no bargaining table is big enough to seat all of the entities that will be potential joint employers under the majority’s new standards." And the majority acknowledged "deciding the joint-employer issue under common-law principles is not always a simple task, just as distinguishing between employees and independent contractors in the common law can be challenging." But they said the dissenters' "law-school-exam hypothetical of doomsday scenarios" won't come true.
In this fight, both sides claim the future. "Big corporations have long benefited from crafty arrangements that allow them to profit off of the work of the men and women who wear their logos and sell their products, all while shirking employment responsibilities," said Jobs With Justice, which supports union activity and a $15 minimum wage. "The NLRB’s decision to modernize the joint employment test will help better ensure that Americans can realize their right to meaningful negotiation with their real bosses in order to secure better wages and livelihoods."
The Competitive Enterprise Institute not surprisingly disagrees. In a statement, the libertarian-leaning organization said: "The NLRB has set back the clock 40 years, to an era of corporate giants when few people had the option of being their own bosses while pursuing innovative employment arrangements."
