Union wins closely watched NLRB case over Who’s the Boss

28 Aug 2015 | Author: | No comments yet »

Companies are on the hook for contractors’ labor policies, NLRB says.

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 a 3-to-2 vote on party lines, the National Labor Relations Board updated its “joint employer” standard by tightening the relationship between workers at a subcontractor or franchise and a parent company. The board updated the standard because the decades-old regulation was “increasingly out of step with changing economic circumstances, the three-person majority — all Democrats — wrote in a 21-page decision.

The ruling is a boost for unions that have tried to organize workers at fast-food restaurants, which often are owned by big companies but run by franchisees. The NLRB’s 3-2 ruling was handed down in the case of Browning-Ferris Industries, a Houston waste management company that used a subcontractor, Leadpoint Business Services, to staff its recycling center in Milpitas, Calif.

The new standard is also significant because corporations could now be held legally liable for workers if franchisees or subcontractors violate labor law. The change, fiercely opposed by many businesses, comes at a time when more companies are turning to temporary contract workers as part of their business model. The ruling determined that Browning-Ferris, which is part of Republic Services Inc., was a “joint employer” even though it didn’t directly hire or have immediate control over people hired by Leadpoint.

Employers like McDonald’s and Yum Brands are also likely to challenge the decision if unions manage to organize a group of employees at one or more of their franchises, if not well before that. In a 3-2 decision, the five-member board said that the old standard no longer kept pace with the current workforce where the diversity of workplace arrangements has significantly expanded. The ruling could affect arrangements at franchise companies such as McDonald’s Corp. that are in many instances a step removed from workplace matters at their franchises.

The decision will make it easier for workers, say, at a franchised McDonald’s to bargain with McDonald’s corporate for union representation, those experts said. “The [NLRB’s] goal is to expand as greatly as possible the ability of unions to engage in collective bargaining with deep-pocketed corporations deemed to be joint employers under today’s broad and extraordinarily elastic definition of that term,” franchisor lawyer David Kaufmann of Kaufmann Gildin & Robbins LLP said. The labor board, which is charged with protecting workers’ rights to organize, changed the definition of a crucial employer-employee relationship that had held in some form since the Reagan era of the 1980s. The change alters a decades-old approach by the NLRB that said one business couldn’t be held liable for employment-related matters at another unless they had direct control over the employees in question. Indeed, the majority decision claims there is a “need to update [the] standard to best serve the federal policy of ‘encouraging the practice and procedure of collective bargaining.’ ” It’s common sense that McDonald’s should be held accountable for the rights of workers at its franchised stores.” “Today’s decision is very problematic for the franchise-franchisee relationship,” Luz said in a statement. “Small business owners that invest in franchise ownership are creating thousands of jobs throughout Massachusetts.

Labor experts said many companies reliant on workers who are a few steps removed from their direct management will now have to rethink how they do business. They cited in their decision a “dramatic growth in contingent employment relationships” that “potentially undermines the core protections of the act for the employees impacted by these economic changes.”

In recent decades, labor advocates have been concerned that parent firms have been able to evade requirements for collective bargaining by outsourcing work to temporary staffing agencies or subcontractors. Chamber of Commerce. “Depending on how the board applies its new ‘indirect test,’ it will likely ensnare an ever-widening circle of employers and bargaining relationships.” For example, if employees at a fast-food restaurant run by a franchisee were to unionize — something almost none have succeeded in doing to date — they would immediately be entitled to negotiate not just with the owner of the individual restaurant but also with the corporate headquarters. If the corporate parent were to agree to pay higher wages or provide better benefits, it would apply only to that particular restaurant, in the same way that concessions granted to employees in a single unionized portion of a national company that is not franchised apply only to that portion. Unions — including the Service Employees International Union, which is funding the Fight for $15 campaign — are the main force behind the push to broaden the joint-employer standard at the NLRB and other federal agencies. The joint-employer issue gained momentum last year when the NLRB’s general counsel issued complaints against McDonald’s and its franchisees as joint employers without explicitly defining his reasons for that decision.

Labor groups have argued that McDonald’s and others should be considered joint employers along with franchisees, since they exert so much control over how franchisees run their businesses. That’s the same reasoning that many fast-food companies have used to distance themselves from the protests for a higher minimum wage that have swept through the country in the last few years. “We do not have the authority to direct or co-determine the hiring, firing, wage rates, hours, or any other terms of employment of our franchisees’ employees,” McDonald’s said Thursday.

Unions are expected to seek to apply the ruling beyond the circle of companies that rely on contractors and staffing agencies, extending it to companies with large numbers of franchisees — even, some argue, to money managers who own significant stakes in corporations. There have been instances in the past in which corporations appear to have terminated a franchise or contractor when that particular outfit was on the verge of unionizing, simply to avoid a union.

Starting in the 1980s, companies increasingly began using workers from temporary-staffing agencies as if they were regular employees, Mitchell said. “The lines began to blur about what makes you an employee of one employer versus another.” “If you’ve got one employer supplying employees, but the other employer is telling them when to report and what to do, they begin to look more like they’re the employee of the party that’s actually in control,” he said. The Affordable Care Act heightened the appeal of temporary workers; corporations utilizing their services were not responsible previously for providing health insurance. “Now we have a question of who is the employer,” attorney Bernhard said. “If the NLRB says they are both employers, which one has to give health insurance?”

Richard Adams, a former McDonald’s franchisee who runs a franchise consulting firm, said the ruling made no sense to him, given how most franchise businesses operate. “It’s so far from the reality of what actually takes place in the business that it can’t have any practical application,” Mr. According to David Weil, the head of the Labor Department’s wage and hour division and the author of an influential book on the subject titled “The Fissured Workplace,” this makes it more likely that workers will be deprived of such protections as minimum wages, overtime pay and the right to unionize.

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