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Published

June 21, 2016

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Introduction

On August 27, 2015, the NLRB issued a decision in a case known as Browning-Ferris Industries (BFI). Despite the Board’s assurance that it had merely “refined” its standard for determining joint employment under the NLRA by applying “long-established principles,” employers knew that the decision represented a significant policy change with potentially serious economic consequences. In replacing the time-tested “direct and immediate control” standard with a sweeping and vague test based on “indirect” and “potential” control over fundamental terms and conditions of employment, the NLRB had suddenly exposed a broad range of businesses to liability for workplaces they don’t control and workers they don’t employ.

The Board’s decision only reinforced the anxiety created by the NLRB’s General Counsel, Richard Griffin, who several months prior had filed unfair labor practice charges against McDonald’s as a joint employer with several McDonald’s franchise owners. These charges were based on complaints filed by Service Employees International Union (SEIU)- funded worker centers as part of the union’sIn replacing the time-tested “direct and immediate control” standard with a sweeping and vague test based on “indirect” and “potential” control over fundamental terms and conditions of employment, the NLRB had suddenly exposed a broad range of businesses to liability for workplaces they don’t control and workers they don’t employ. campaign to organize fast food restaurants.

The NLRB’s actions, alarming enough on their own, raised additional fears within the business community that other regulatory agencies would start applying expansive standards to find joint employment status under their respective statutes. Those fears have proved well founded, as both the Occupational Safety and Health Administration (OSHA) and the Wage and Hour Division (WHD) at the U.S. Department of Labor (DOL) have indicated their intentions to heavily scrutinize situations that may give rise to joint employer liability. Moreover, several state and local governments have picked up on the concept and begun to apply their own expansive views of joint employment.

In 2015, the U.S. Chamber of Commerce released a report on the joint employer issue titled “Opportunity at Risk.” The report examined the history of the franchising and subcontracting business models, the historical treatment of franchising and subcontracting under several different statutes, and efforts by the NLRB to undermine those models. The report was released five months before BFI was issued.

This report, produced by the U.S. Chamber of Commerce and the International Franchise Association (IFA), picks up where “Opportunity at Risk” left off. It first examines the roots of the campaign against the franchising and subcontracting business models. This includes the writings of WHD Administrator David Weil and the “Fight for $15” protests, which are the public relations face of the SEIU’s campaign to unionize the fast food industry. It then highlights the actions of the NLRB, the WHD, and OSHA, with regard to joint employment. While it is too early to compile hard economic data, the report includes descriptions of how some businesses are dealing with the fallout of the BFI and McDonald’s cases. Finally, it examines how state and local governments are approaching the issue.

While an expansive view of joint employment may have been conceived by a small group of activists and union leaders, it now influences government policy at the federal, state, and local levels. Unfortunately, the consequences of these ongoing policy changes are likely to spread far beyond the narrow organizing objectives of the SEIU and harm businesses of all shapes and sizes — as well as their employees. In essence, what was once viewed simply as a labor issue is now a local small business and jobs issue. Congress can, and must, take action to return common sense to this aspect of labor law either through an appropriations rider or stand-alone legislation Left unchecked, the new liabilities created by the NLRB, and increasingly by other government entities, will be to the detriment of workers, employers, and the economy.