NLRB's New Joint Employer Standard: Everything You Wanted To Know But Were Afraid To Ask

Rarely, if ever, has a ruling from the National Labor Relations Board provoked such intrigue. Last week, in a case that stemmed from a dispute at a major California-based recycling firm called Browning-Ferris Industries, the NLRB broadened its standard for what qualifies as a “joint employer” -- a move that could put corporations on the hook along with their subcontractors and franchisees for violations of labor law.

Unions are praising the decision as a levelheaded response to a rapidly evolving employment landscape. But businesses are blasting the move as another case of unwarranted government overreach that could stifle growth. In alarmist language typical of the ruling’s most fervent critics, the Wall Street Journal editorial board lamented that the new standard “upends thousands of business relationships” and promises to “harm diverse industries in every state.”

Is that really the case? Sifting through the lofty rhetoric on both sides, International Business Times explains what the decision really means.

What did Browning-Ferris actually do? Specifically, the NLRB was deciding whether a union that represents the employees of a waste management subcontractor also had rights to represent employees at the larger parent company. The agency agreed with the union. As it made the ruling, it revisited its standard of what constitutes a “joint employer.” The agency tossed out the old one -- which Reagan administration appointees had tightened in the early 1980s -- and came up with a looser, more expansive version.

The new standard no longer requires joint employers to exert “direct” control over their workers; “indirect” control suffices. It also does not require that joint employers actually exercise that control; the potential to do so is enough.

Is this the end of subcontracting, the death of the franchise model? No. The ruling does not compel businesses to stop using subcontractors or franchisees. It does, however, increase the likelihood that parent companies can be held liable for labor violations committed by their partners further down the contracting chain.

What kind of violations could companies be on the hook for? Violations of the National Labor Relations Act, which covers most employees in the private sector. These can be anything from bosses interfering with free and fair union elections to retaliating against employees who speak out about scheduling practices. The NLRB, which oversees the act, receives these sorts of complaints, often known as “unfair labor practices,” on a regular basis. They aren’t the same thing as minimum wage violations -- say, when a company refuses to pay mandatory overtime. But these violations can also come with monetary penalties, like compensation for employees found to be illegally fired or demoted.

What about the unionization part? Under the agency’s old “joint employer” standard, unions had limited bargaining rights across the contracting chain. Now organizers have stronger grounds before the NLRB to organize unions that could, in theory, represent workers at both the parent company and subcontractors. In such cases, employees would be bargaining directly with the larger company, which often has more financial means than any of its subcontractors. For example, a union that represents drivers at a bus firm contracted out by Apple and bargains only with the shuttle company might now, under the NLRB ruling, have stronger grounds to demand a seat at the negotiating table with the tech firm itself. That’s a boon to workers.

Conventional wisdom says the ruling doesn’t just benefit unionized workers. It also gives a boost to the unorganized workers toiling away at subcontractors, since the larger employers want to avoid the risk of racking up unfair labor practice charges.

Wait, so that’s it? Since the NLRB is such an important federal agency, observers suspect that others like the Department of Labor -- which includes the Occupational Safety and Health Administration and the Mine Safety and Health Administration -- could follow suit.

Is this going to lead to mass unionization at fast-food corporations and companies with subcontractors? Union organizing campaigns tend to be grueling, complicated endeavors. No matter how organizers respond to Browning-Ferris, the impact won’t be immediately visible. Still, the ruling could trigger a spike in efforts to broaden the reach of existing unions across contracting chains; it also could see the creation of new unions with large bargaining units previously unlikely to withstand scrutiny at the NLRB.

Unions historically have been reluctant to organize individual fast-food franchisees, in part out of fear that management could simply close any successfully unionized stores without real legal consequence. The new standard should help assuage that concern, since such a closure now runs a greater risk of putting corporate headquarters in the crosshairs of the NLRB. (Still, this sort of retaliation is hard to prove. Earlier this year, when Walmart closed five stores for “plumbing issues,” including one in California that was known as a bastion of protest, workers complained to the NLRB, accusing the company of retaliation. Walmart fiercely denies that charge and the case remains outstanding.)

What does this mean for the Fight for 15? Unionization in the traditional sense remains far off. Even if fast-food corporations were to share employment responsibility with their franchisees, it’s hard to imagine a majority of McDonald’s workers across the country signing union cards and voting for union representation.

But it’s still a big win for the Fight for 15 movement, which is funded heavily by the Service Employees International Union. One of the group’s aims has been to get fast-food companies to sit down with workers at the bargaining table and negotiate some type of agreement that includes advances for employees. In the past, corporations have argued that activists should take up any grievances they have -- over pay, over scheduling, over alleged retaliation -- with individual franchisees. But as the companies face more legal liability, they could feel more pressure to take labor’s demands seriously. (McDonald's already is defending itself against landmark charges of unfair labor practices filed jointly against the corporation and its franchisees. These sorts of complaints could become more common.)

Is the new standard here to stay? The ruling likely will be appealed. There’s also the possibility that a future Republican-controlled NLRB -- say, one serving under a President Trump or Walker -- could revise the standard.