Labor board ruling puts more companies on hook for franchise workers

28 Aug 2015 | Author: | No comments yet »

Companies liable for labor violations by franchisees: U.S. labor board.

Under the ruling, a parent company that hires a contractor is considered a joint employer of the workers at its facilities even if it has only indirect control over working conditions, the New York Times reports.Companies can be held liable for labor violations committed by franchisees and contractors, the National Labor Relations Board ruled on Thursday, in a decision that could put pressure on businesses like McDonald’s dependent on franchising to negotiate directly with unions.A federal labor board voted Thursday to redefine the employee-employer relationship granting new bargaining powers to workers caught up in an economy increasingly reliant on subcontractors, franchisees and temporary staffing agencies.

WASHINGTON—A federal labor ruling released Thursday could put thousands of companies on the hook for workplace disputes and union-organizing matters involving temporary and franchise workers. In other words, this ruling makes it easier for workers at McDonald’s to negotiate with the corporation, not just the individual McDonald’s location where they work. “This is about, if employees decide they want to bargain collectively, who can be required to come to the bargaining table to have negotiations that are meaningful,” said Wilma B. And it comes as concerns are growing about a generation of new Internet-fueled business such as Uber and Lyft that depend heavily on independent contractors. The ruling, which may eventually be challenged in court in a variety of individual disputes, changes the definition of a crucial employer-employee relationship that had held in some form since the 1980s. 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. “Every business-to-business relationship is at risk,” said Michael Lotito, a lawyer at Littler Mendelson in San Francisco who works with industry groups.

In a case that drew intense lobbying by both business and union groups, Democratic appointees on the panel split 3-2 with Republicans to adopt a more expansive definition of what it means to be an “joint employer,” making it more difficult for companies to avoid responsibility through various forms of outsourcing. The change, fiercely opposed by many businesses, come at a time when more companies are turning to temporary contract worker as part of their business model. The standard, in use for three decades, is “increasingly out of step with changing economic circumstances, particularly the recent dramatic growth in contingent employment relationships,” the board ruled. Not all are in support of the decision; some worry it could de-incentivize opening franchise businesses by taking control away from the smaller employers.

In doing so, the panel sided with labor advocates and academics who have described an increasingly “fissured” economy, in which whole industries have been built on business models that offer workers few of the protections of a traditional employer relationship. “With more than 2.87 million of the nation’s workers employed through temporary agencies in August 2014, the Board held that its previous joint employer standard has failed to keep pace with changes in the workplace and economic circumstances,” the Board said in a release accompanying its decision. The Department of Labor has cracked down on employer misclassification of independent contractors, and the Occupational Safety and Health Administration has directed inspectors to consider whether principal employers might be at fault for the safety violations of their subcontractors. The decision will be applied in separate cases pending against McDonald’s Corp. in which the labor board’s general counsel has accused the restaurant chain of labor violations at its franchisees. The dissenting NLRB members on Thursday said the board had exceeded its authority by redefining employment, and that the ruling would create uncertainty for businesses nationwide. The NLRB’s change means that companies that have the power to influence the conditions of workers through contracts or franchise agreements may be deemed joint employers.

As a result of the decision, some businesses may be able to distance themselves from their partners to avoid joint employer status, but others may find they need to exert more control. Thursday’s N.L.R.B. ruling, by enshrining a broader joint-employer definition into doctrine, makes it more likely to apply in the McDonald’s case as well, though experts point out that joint employer designations are typically very dependent on the circumstances of each case. Corporations are “trying to have it both ways — have the benefits of the control, and not the disadvantages,” says Timothy Glynn, a professor at Seton Hall University Law. “Where I think it would be very difficult to give up control is circumstances where there’s some exacting need for quality, timeliness, or consistency in the product.” Like a fast food franchise, for example. While this case did not address franchising directly, the new standard will apply in a major series of cases against McDonald’s scheduled for arguments in the fall.

Under the revised standard, the NLRB also will consider if a business exercises indirect control through an intermediary, or has reserved the right to do so. The board will consider this on a case-by-case basis, board officials said Thursday. “Our aim today is to put the board’s joint-employer standard on a clearer and stronger analytical foundation, and, within the limits set out by the act, to best serve the federal policy of ‘encouraging the practice and procedure of collective bargaining,’” the Democrats said. Responding to the decision, House Education and the Workforce Committee Chairman John Kline (R-Minn.) vowed to “roll back” the NLRB’s shift, while Senate Health Education Labor and Pensions committee chairman Lamar Alexander (R-Tenn.) announced he would introduce a bill to “invalidate” the ruling. The case concerned a recycling company called Browning-Ferris Industries in Milpitas, Calif., which used a temporary staffing agency called Leadpoint to provide workers. It ordered that ballots impounded after the Teamsters’ election in April 2014 be counted, which — if the union wins — would allow it to bargain directly with the recycling company as well as the staffing agency that hired them. “Today’s decision is another step to show that companies can no longer claim they are not employers when problems arise,” said Ron Herrera, Director of the Teamsters Solid Waste and Recycling Division. “Instead of pointing fingers if a worker gets hurt, companies will now be accountable.

It’s the decent and reasonable expectation that workers should have at work.” The issue has not just been a bone of contention between unions and employers.

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