NLRB ‘Joint Employer’ Ruling Aids Unions

The Obama administration is redefining what it means to be an employer.

The National Labor Relations Board (NLRB) recently handed down one of its biggest decisions of President Barack Obama’s tenure, ruling that companies can be held responsible for labor violations committed by their contractors.

While the ruling from the independent agency specifically deals with the waste-management firm Browning-Ferris, the so-called “joint employer” decision could have broad repercussions for the business world, particularly for franchise companies.

The Aug. 27 ruling could hurt businesses as diverse as commercial laundries, restaurants, retailers, manufacturers and construction firms, as well as hotels, cleaning services and staffing agencies. For example, many healthcare facilities now have members of a laundry operator’s staff working in the hospital, overseeing linen distribution. These employees work for the commercial laundry, but under this decision the hospital may be considered a joint employer.  

At issue in the case was whether Browning-Ferris was responsible for the treatment of contracted employees. The Houston-based company hired Leadpoint Business Services to staff a recycling facility in California.

The NLRB determined that Browning-Ferris should be considered a "joint employer" with the Phoenix-based staffing agency. As a result, the company can be pulled into collective-bargaining negotiations with those employees and held liable for any labor violations committed against them.

The NLRB’s 50-page ruling is a sharp departure from its previous decisions that stated that companies were only responsible for employees who were under their direct control. Without the power to set hours, wages or job responsibilities, the earlier rulings held that companies could not be held responsible for the labor practices of contractors.

But the NLRB charted a new course with its latest decision, saying that the old standard is “increasingly out of step with changing economic circumstances.”

The NLRB ruling could affect the growing number of temporary workers and independent contractors who don’t receive the same protections as full-time employees.

Rather than hiring their own employees, many companies have grown accustomed to turning to staffing agencies to supply temporary workers or contract with other companies to complete tasks.

The NLRB is seeking to end that situation by holding both companies responsible as joint employers, because they “share or co-determine those matters governing the essential terms and conditions of employment."

The decision is the latest in a string of major victories for labor groups under the Obama administration, which has already issued several sweeping executive actions on worker protections and wages.

The NLRB, which now has a Democratic majority, also has taken steps to make it easier for employees to unionize.

The two Republican appointees on the labor board, Harry Johnson and Philip Miscimarra, dissented from Thursday’s 3-2 ruling.

They argued that “no bargaining table is big enough” for two companies.

"Changing the test for identifying the ‘employer,’ therefore, has dramatic implications for labor relations policy and its effect on the economy,” they wrote.

Several pro-business groups, including the U.S. Chamber of Commerce, filed Amicus briefs opposing the concept of joint employers. TRSA was a cosigner to the Chamber’s brief. An appeal of the NLRB’s decision is likely, either through the courts or action by Congress.