WASHINGTON -- In a decision that will affect many convenience stores and restaurants, the National Labor Relations Board (NLRB) has “refined” its standard for determining joint-employer status under the National Labor Relations Act to better reflect the "current economic landscape.” It ruled late last week that its previous joint-employer standard has failed to keep pace with changes in the workplace and economic circumstances.
The NLRB has paved the way for franchisors to be held responsible for the employment practices of franchisees, ruling that a party doesn't have to actively supervise a staff to be regarded as a "joint employer."
In a three-to-two decision involving Browning-Ferris Industries, the NLRB applied "long-established principles" to find that "two or more entities are joint employers of a single workforce if they are both employers within the meaning of the common law; and they share or co-determine those matters governing the essential terms and conditions of employment."
In evaluating whether an employer possesses sufficient control over employees to qualify as a joint employer, the board will--among other factors--consider whether an employer has exercised control over terms and conditions of employment indirectly through an intermediary or whether it has reserved the authority to do so itself.
“The NLRB today satisfied the politically motivated requests of organized labor and manufactured a new joint-employer standard that small businesses have long been bracing for,” International Franchise Association CEO Steve Caldeira said. “In doing so, the board ignored decades of judicial precedent and bipartisan policy agreement dating back to the Johnson administration to invent new labor law.”
In a dissenting opinion from the NLRB's ruling, board members Philip Miscimarra and Harry Johnson, both Republicans, said, "Instead of overturning one discrete longstanding agency interpretation that affects a statutory exemption for a single category of employer, the board has substantially altered its interpretation of joint-employer status across the spectrum of private business relationships subject to our jurisdiction."
They continued, "Our greater concern is the impact of the majority’s reformulation on a much broader body of law, affecting multiple doctrines central to the Act that have been developed and refined through decades of work by bipartisan boards, the courts and Congress. … The majority here gives insufficient consideration to the 'potentially massive' economic implications of its new joint-employer standard, and it requires innumerable parties to 'divine the agency’s interpretations in advance or else be held liable when the agency announces its interpretations for the first time in an enforcement proceeding.' We believe that the board should adhere to the 'joint-employer' test that has existed for 30 years without a single note of judicial criticism."
The ruling was immediately assailed as a dire threat to restaurant franchising, according to a Restaurant Business report, even though the ruling had nothing to do with either the restaurant or franchise industries.
The decision, however, will likely have implications on the case the NLRB is litigating against McDonald’s and several of its franchisees to determine whether large franchisors can be defined as “joint employers” of franchisees’ staffs, said Restaurant Business.
Last week, the NLRB blocked McDonald’s challenge of a preliminary ruling that stated a franchisor should be viewed as a joint employer. To redefine large franchisors as joint employers would challenge longstanding protocols of restaurant franchising, as franchisees are generally responsible for employee recruitment, training, wages and working conditions, as well as a number of daily activities central to maintaining their staffs.
Deeming franchisors joint employers would hold parent corporations legally accountable for those employees, making them more vulnerable to lawsuits and a other regulatory actions enacted on workers’ behalf.
Click here to view the full Restaurant Business report.
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