Should it stand, an August ruling by the National Labor Relations Board could change the nature of the employee/employer relationship at businesses across the country.
The ruling significantly broadens the definition of what it means to be a “joint employer,” said Fort Wayne attorney Anthony Stites, of Barrett McNagny. “It basically did away with the rule that had been in place for almost 50 years.”
What it probably won’t do, however, is spark a burst of unionizing activities, particularly in this northeast Indiana, Stites said.
“My experience is, I don’t see a lot of union organizing activity in our region flowing from things I thought would have caused more,” Stites said.
On that, Eilbacher Fletcher attorney Alan VerPlanck, who often represents labor unions, agrees. The ruling does nothing to make the process of getting enough employees to sign union cards to trigger a vote on unionizing any easier, he said.
The case involved a California recycling business, Browning-Ferris Industries, and workers at one of its subcontractors. In a controversial 3-2 decision, the NLRB ruled that Browning-Ferris could be considered a joint employer of those workers.
Where previously a company was considered a joint employer only if it had direct control over the terms and conditions of employment of workers at a franchise, subcontractor or subsidiary, the new decision says a company could be considered a joint employer if it has indirect control, or even the ability to exercise direct control.
Stites has been getting calls from business clients asking what it might mean for them.
“The whole concept is difficult to get your arms around,” he said. “It’s so broad it’s hard to be specific. When it says you have to have right to exercise indirect control, I’m not sure that’s capable of being very well described because it is not something that happens, it’s something that could hypothetically happen but never did but it still subjects you to liability and responsibility as if it did happen.”
Franchisers, for example, often have language in their franchise agreements that allow them to take control of a franchisee operation should that franchisee fail to live up to company standards. That link now potentially exposes the franchiser to being considered a joint employer, even if it never exercises its right to control.
The decision could be so far reaching that companies that now operate through franchises could decide to revert to another ownership scheme, VerPlanck speculated.
“An upstream entity could have the legal responsibility of for the acts of a downstream entity, where the parent, the contractor, the franchiser has done absolutely nothing wrong,” Stites said.
For example, if an employee or union should accuse the downstream business of an unfair labor practice – a violation of the National Labor Relations Act or other legislation that guarantees workers’ right to organize and/or discuss wages and other conditions of employment – the upstream business could be held liable.
“There’s just more targets to go after for recovery of any claim and to negotiate with if you’re already unionized or are attempting to unionize. It takes the cost of compliance and doesn’t spread it, it multiplies it, over multiple entities,” Stites said.
The ruling will almost certainly be appealed in the courts, he added.
Meanwhile, legislation introduced in September, and supported by business groups such as the National Retail Federation, seeks to overturn the NLRB’s joint employer ruling.
“Small business subcontractors and franchisees provide millions of jobs for American workers and thousands of opportunities for local entrepreneurs to own their own businesses and contribute to the local economy.
“This action from Washington is just one more example of unelected government bureaucrats creating roadblocks in the path of job creation and economic growth,” David French, the NRF’s senior vice president for government relations, said in a statement.
The Browning-Ferris ruling isn’t the only one this year that may redefine how companies treat their employees, VerPlanck noted.
“This has been an exciting time for the Labor Department and the NLRB,” he said.
An opinion issued by the NLRB’s general counsel earlier this year tackles questions of whether company handbooks could be considered in violation of employee protections provided by the National Labor Relations Act.
Even if the handbook language doesn’t specifically violate rights guaranteed under the act, it still could be unlawful if employees could reasonably construe it as having a chilling affect – whether they are unionized or not, the opinion said.
Handbook policies that cover confidentiality, use of social media and conflict of interest, among other things, could be affected if they seem to limit employees in their discussions of wages and other conditions of employment.
Perhaps the most far-reaching of the three is a July administrative opinion from the Department of Labor that addresses the “misclassification” of employees as independent contractors. It could virtually eliminate that practice, VerPlanck said.