Labor ruling eases union bargaining

Joint-employer ranks grow

WASHINGTON -- The National Labor Relations Board in Washington on Thursday made it easier for unions to bargain for higher wages and benefits, potentially opening the door for organized workers at fast-food chains and other franchises to negotiate with the larger corporations.

The labor board, in a closely watched case, unveiled a new standard for determining which companies are "joint employers" of workers paid by another business such as a franchisee or contractor.

Previously, employers were responsible only if they had direct control over working conditions. 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.

Under the new ruling, a company that hires a contractor to staff its facilities may be considered a so-called joint employer of the workers at that facility, even if it does not actively supervise them.

A union representing those workers would now be legally entitled to bargain with the upstream company, not just the contractor, under federal labor law.

"The ruling is especially important because sometimes the contractor is such a small entity, it exists on such a shoestring, that you have to get the lead firm to the table," said Wilma Liebman, a former labor board chairman.

Business representatives said the ruling could make it much harder to operate franchises in the future, undermining a popular path for many entrepreneurs.

"This will clearly jeopardize small employers and the future viability of the franchise model," said Steve Caldeira, president of the International Franchise Association, an industry group. "If I'm an existing and/or aspiring franchisee, why would I want to expand my business and/or get into franchising if I don't have the ability to run the day-to-day operations of the business?"

The board cited a rise in temporary employment in its decision. Almost 2.9 million Americans had jobs through temporary agencies in 2014, or 2 percent of the workforce, up from 1.1 million in 1990, the board said.

Business groups said now companies would become less efficient by tying them more directly to their contractors or other businesses that are now a step removed.

The International Franchise Association, a Washington-based business group, said the decision is a "seismic shift" in labor law.

The ruling was derided by the labor board's two Republicans, who wrote a 29-page dissent -- eight pages longer than the opinion -- saying it will "subject countless entities to unprecedented new joint-bargaining obligations."

The labor board's three Democrats said the Republicans' dissent was "long and hyperbolic," and misstates the standard "and grossly exaggerates its consequences."

Chuck Cohen, an attorney at Morgan Lewis in Washington and former member of the board, said the standard is likely to be challenged in court.

"This doctrine is so far-reaching, I'm assuming it will end up in the Supreme Court," Cohen said.

In Thursday's ruling, the labor board held that a company called Browning-Ferris Industries of California was a joint employer of workers hired by a contractor to help staff the company's recycling center. But the ruling could apply well beyond companies that rely on contractors and staffing agencies, extending to companies with large numbers of franchisees.

Republic Services, the parent company of Browning-Ferris, said the ruling overturned "30 years of settled law."

"This unnecessary change to decades-old law is legally wrong and disappointing, and could have an unwarranted impact on existing business relationships across many industries," the company said in a statement.

The ruling is likely to have an effect on a case the labor board is litigating against McDonald's Corp. and several of its franchisees. In that case, the labor board's general counsel, who essentially acts as a prosecutor, asserts that the company is a joint employer along with a number of franchisees, making it potentially liable for numerous reported violations of workers' rights, such as retaliating against those who have tried to organize unions.

Thursday's 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 dependent on the circumstances of each case.

Before Thursday's ruling, the prevailing doctrine typically required the upstream company to exert "direct and immediate" control over working conditions of employees at its franchisees or contractors to be considered a joint employer.

But the labor board ruling moves the standard closer, if not all the way back, to what some say is its more liberal, pre-1980s interpretation. Under the new test, a company can be considered a joint employer even if it has only indirect control over working conditions -- say, through requiring the use of certain scheduling software that affects the timing and length of workers' shifts.

"The decision today could be one of the more significant by the NLRB in the last 35 years," said Marshall Babson, a lawyer who helped write the brief for the U.S. Chamber of Commerce in the case and who was a Democratic appointee to the labor board during Ronald Reagan's presidency. "Depending on how the board applies its new 'indirect test,' it will likely ensnare an ever-widening circle of employers and bargaining relationships."

Information for this article was contributed by Noam Scheiber of The New York Times; by Jim Snyder of Bloomberg News; and by The Associated Press.

Business on 08/28/2015

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