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Gruber: NLRB announcement shakes up joint-employer standard

August 13, 2014
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By Andrew Gruber

It is ironic that the week after Burger King’s new CEO is heralded for a profitability plan designed around the increase of franchises and the reduction of company-owned locations, the general counsel of the National Labor Relations Board directed officials to treat McDonald’s USA as a “joint employer” with its franchisees for purposes of the National Labor Relations Act. Some say that it is the juxtaposition of these two storylines that underscores the tension between the business community and the current administration. Nonetheless, this new direction by the board may impact everything from wages to potential unionization for franchises, staffing companies and subcontractors.

gruber-andy.jpg Gruber

Over the past two years, union-supported McDonald’s workers have waged the “Fight for $15” – a coordinated attempt to increase wages in the fast food industry and call attention to perceived work-related concerns. Such efforts have dovetailed with the social and political push for an increase in the minimum wage and the still-beating Occupy Wall Street movement. McDonald’s workers have engaged in a number of walkouts, protests and rallies – each designed to bring publicity to their movement.

These efforts have the “natural” effect of creating tension between management personnel at the restaurants (many of which are franchise owned and operated) and local workers. This has resulted in the filing of unfair labor practice charges with the board, alleging that management has interfered with workers’ rights protected by the Act. At last count, there were 181 charges pending before the board, at least 43 of which involved allegations that McDonald’s USA was a joint employer with its franchisees, sharing responsibility for the treatment of the workers and the resulting liability.

Richard Griffin Jr., who effectively serves as the board’s chief prosecutor, announced July 29 that the board will seek to hold McDonald’s USA liable for its franchisees’ employment practices. In so doing, he is construing the board’s “joint- employer” standard far broader than the standard the board has followed in years past. Griffin aligns closely with the board’s pro-labor majority, which means the board will likely accept his position.

Indeed, the board is currently contemplating a revision to its joint-employer standard across a broader spectrum. In Browning-Ferris Industries of California, Inc. et al. v. Sanitary Truck Drivers and Helpers Local 350, International Brotherhood of Teamsters, the board is currently accepting amicus briefs from interested parties on whether to alter the board’s position on joint-employer liability. For decades, the board has determined that legally separate entities qualify as a joint employer only when they share basic employment functions (hiring, firing, supervision). See TLI Inc., 271 NLRB 798 (1984); Laerco Transportation, 269 NLRB 324 (1984). Without such control, a company which contracts its labor force is not a joint employer of such workers – avoiding collective bargaining requirements and liability for violations of the Act.

While the review in Browning-Ferris Industries of California is pending, Griffin’s directive concerning McDonald’s USA shows that certain board officials see a sweeping change on the joint-employer standards. Griffin’s directive is not published and is not binding law, so his underlying analysis of this situation is unknown. However, the Teamsters in Browning-Ferris Industries of California have given insight into what is likely the prevailing thought-process:

“(T)he NLRB’s current standard for defining joint employer status makes it overly difficult to establish joint-employer status. The current test does not address the realities of the modern workplace, where facility operators frequently rely on labor contractors to supply workers, while retaining control over both their and their labor contractor’s workforce. The current standard allows contractors and facility operators to avoid, as a practical matter, the basic legal obligation to recognize and bargain with workers’ chosen representatives, because such employees cannot engage in meaningful bargaining when the party that exercises control and influence over their working conditions is not required to participate or bargain.”

Griffin’s directive with McDonald’s USA shows an apparent willingness to lump the franchisor/franchisee relationship into the labor contractor pool at issue in Browning-Ferris Industries of California. Thus, it is not a stretch to assume that the board’s joint-employer standard will be broadened, and that such standard will reach franchises of nearly all sorts, staffing companies and labor subcontractors. A broadened joint-employer standard would also give unions potentially more support and opportunity for growth. Combined with the board’s new micro-unit rules, unions who could not otherwise organize a geographically diverse workforce would be provided greater opportunities to organize employees across multiple locations, or in a limited number of job classifications, whichever gives it the best chance to succeed.

Businesses are wise to address this issue now – reviewing their labor structure and subcontracts for protections and indemnification – otherwise they may be surprised to learn “who’s the boss.”•

Andrew Gruber is a partner in the Labor and Employment Practice Group of Bingham Greenebaum Doll LLP out of its Indianapolis office. He can be reached at agruber@bgdlegal.com. The opinions expressed are those of the author.

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