Much has been made of the ruling on July 29, 2014 by the National Labor Relations Board’s General Counsel, which authorized complaints to go forward with regard to alleged unfair labor practice violations of the National Labor Relations Act by McDonald’s, USA, LLC and some of its franchisees. The result of that decision – in a case that is a long way off from being presented to the Board for decision – is the General Counsel found enough merit in the argument that McDonald’s, USA, LLC is a joint employer that the complaints will be issued with McDonald’s, USA, LLC named as a joint-employer respondent in connection with alleged unfair labor practices.1
However, there is a far more immediate concern for employers, unions, and employees just below the horizon.
Who is a Joint Employer?
Since 1984, a pair of rulings by the NLRB set the standard for what constitutes a joint employer for purposes of enforcement of the NLRA. In Laerco Transportaion and TLI, Inc. the Regional Director was determined to have correctly ruled that joint-employer status is established when there is a “showing that the employer meaningfully affects matters relating to the employment relationship such as hiring, firing, discipline, supervision, and directions.”2 That ruling was later interpreted by the NLRB to require “direct and immediate” control by the putative employer over employment matters.3
The impact of this definition of a joint employer is significant. It affects collective bargaining because, instead of allowing for larger collective bargaining units with the power of numbers behind it, a more narrow definition of a joint employer limits opportunities for unionization as potential members are splintered among hundreds of small companies.
Likewise, as the NLRB is charged with investigating and prosecuting unfair labor practices under the NLRA, employers who believed they had no involvement with certain terms and conditions of employment are suddenly and potentially liable for violations. Finally, in a world where franchising4 has exploded and more and more business are using contingent or temporary employees,5 the expansion of the joint-employer doctrine could result in the largest increase of private union membership in decades. The stakes are indeed high.
In the case of Browning-Ferris Industries of California, Inc. and FRRII, LLC d/b/a Leadpoint Business Services and Local 350, International Brotherhood of Teamsters, Case 32-RC-109684, which will be argues before the Board as it considers seventeen amicus briefs, the issue will be whether the Board should adopt a different standard for what constitutes a joint employer.
In this case, Petitioner, Local 350, International Brotherhood of Teamsters (“Local 350”) seeks to represent all fulltime and regular part-time employees jointly employed by FRR-II, LLC d/b/a Leadpoint Business Services (“Leadpoint”), a temporary staffing agency, and Browning-Ferris Industries of California, INC. (BFI”), the client to whom Leadpoint supplies employees. The Regional Director rejected Local 350’s claim that Leadpoint and BFI were joint employers, and the sole issue on appeal is whether BFI jointly employs Leadpoint’s workers.
The Unions Perspective: Time for a Broader Standard
Local 350 argues that, while the facts support a finding that the employers are joint employers even ender the present standard, the Board should adopt a broader standard to effectuate the purposes of the NLRA and to conform to prior case law and “industrial realities.” Local 350 maintains that “requires the Board to consider not merely the indicia of control exerted over the employees by each employing entity, but also the relationship, and the extent of control as between the two employing entities,” which, it concludes, “requires consideration of the indirect control.”6
Next, Local 350 contends that the Board’s current analysis ignores the “industrial realities” of today’s workplace.7 From Local 350’s standpoint, the Board’s narrow view of employment “makes even less sense in our current economy” where “the modern worker is awash in a sea of multi-layered and dependent relationships, and the current joint employment standard leaves him or her bereft of meaningful resort to the protections and processes of the Act.”8
Local 350 is not alone in its quest to change the employment landscape for millions of workers. In addition to multiple amicus briefs supporting its position, the General Counsel of the NLRB has submitted a supporting amicus brief. While stating that the General Counsel “expresses no view of the merits of the case” because representation proceedings are “non-adversarial in nature,” it does assert that it maintains an interest in the outcome. The General Counsel states unequivocally that the Board should not adhere to its existing joint-employment standard and should adopt a new standard, where under the “totality of circumstances” and joint-employer relationship exists where “the putative joint employer wields sufficient influence over the working conditions of the other entity’s employees such that meaningful bargaining could not occur in its absence.9
According to the General Counsel, this approach would ensure that the Board would return to its traditional standard where “industrial realities” make an entity essential for meaningful bargaining. In making its case, the Board analogizes to the way “employer” is defined by the Federal courts in Title VII matters, which often utilize a “hybrid” right to control/economic realities or the traditional joint-employer standard.10
The General Counsel makes it plainly clear what is at stake. In an economy where (i) the contingent workforce has increased steadily, and (ii) franchising is ever expanding, it is the General Counsel’s position that these commercial forms undermine meaningful collective bargaining and thus negatively impact union participation.11
Management: A Broader Standard is No Standard
BFI’s opposition is based on the argument that the joint-employer standard is, in reality, no standard at all and thus fails to satisfy due process. BFI posits that “standard” proposed by the Union and the General Counsel provides no guidance for businesses about how they can structure their business operations to provide certainty that they are, or are not, joint-employers under the NLRA.
Using its own version of the “industrial realities” standard, BFI and Leadpoint point out that business relationships typically involve agreements that indirectly, but necessarily, impact the terms and conditions of employment, providing as an example that service contracts “often involve significant control the customer over the service provider and, when services are performed on the customer’s property, the amount of control is even greater.”12
Likewise, the same argument can be applied to franchises, since franchises succeed not only because the public wants the products they provide, but also because of the consistency with which they provide them. Successful franchises generally dictate many things that could impact the employer-employer relationship, such as how to perform certain tasks, how franchisees can budget for a successful operation, and how many work hours are needed to perform certain tasks.
Moreover, BFI argues that the standard proposed by Local 350 would violate the NLRA by failing to give ordinary meaning to the term “employee” which it contends, citing to Supreme Court precedent, would lead to the conclusion that “an employment relationship does not exist unless the worker is directly supervised by the putative employer.”13
Finally, BFI argues that adoption of the new standard would violate the Taft Hartly Act of 1947, which directed the Board to apply common law agency principles when interpreting the NLRA provisions.14 Those principles are that joint employer status requires “a showing that the employer meaningfully affects matters relating to the employment relationship such as hiring, firing, discipline, supervision and direction.” 15
While the principle of stare decisis plays a role in Board decision making, the Board has demonstrated on several occasions its willingness to chart a different course.16 Thus, whatever the precedent may be, it is unlikely to be a persuasive factor in the Board’s decision in Browning-Ferris. The fact is that private union membership has declined significantly over the past fifty years.
Some argue that unions have become unnecessary, while others fervently believe that the structure of today’s business operations has thwarted a worker’s ability to organize and form collective bargaining units to their economic detriment. If it is the later, then the decision in Browning-Ferris will send shockwaves through the temporary staffing and franchise industries. One can expect that workers at establishments such as McDonald’s, given the opportunity to better their economic lives by having McDonald’s USA, LLC on the other side of the bargaining table as opposed to their relatively small franchise owner, will fervently seek to organize and secure the right to collectively bargain.
Nat’l Labor Relations Bd., NLRB Office of the General Counsel Authorizes Complaints Against McDonald’s Franchisees and Determines McDonald’s, USA, LLC is a joint Employer, available at http://www.nlrb.gov
2Laerco Transportation, 269 NLRB 324 (1984); TLI, Inc. 271 NLRB 798 (1984).
3Airborne Freight Co., 338 NLRB 597 (2002).
The Entrepreneur’s Source, Franchise Industry Expected to Grow Faster than Rest of the Economy in 2014, http://www.entrepreneurssource.com/blog/(“Franchises
are expected to add nearly 200,000 new jobs in 2014…[and] will continue to outpace total private sector employment growth by 0.3 percent. The number of franchise businesses in 2014 is expected to increase by 12,915 in 2014, bringing total establishments to 770,368”).
Steven Greenhouse, N.Y. Times, The Changing Face of Temporary Employment, Available at http://www.nytimes.com
(The number of workers employed through temp agencies has climbed to a new high — 2.87 million, according to the Bureau of Labor Statistics, and they represent a record share of the nation’s work force, 2 percent).
7Jewell Smokeless Coal Corp., 170 NLRB 392 (1968).
Brief for Petitioner Local 350’s Opening Brief at page 33: , Browning-Ferris Indus. Of California, Inc., & Fpr-II, LLC & Sanitary Truck Drivers & Helpers Locals 350, Int’l Bhd. Of Teamsters
, available at http://www.nlrb.gov/case/32-RC-109684
Amicus Brief of the General Counsel at pp. 16-17, , Browning-Ferris Indus. Of California, Inc., & Fpr-II, LLC & Sanitary Truck Drivers & Helpers Locals 350, Int’l Bhd. Of Teamsters, available at http://www.nlrb.gov/case/32-RC-109684
10Lopez v. Johnson, 333 F3d 959 (9th Cir. 2003); Bristol v. Bd. of county Comm’rs, 312 F3d 1213 (10th Cir. 2002).
The General Counsel noted in its brief that “some scholars have posited that franchisors consider an avoidance of unionization . . .to be the ‘prime advantage of franchising.’” Amicus Brief of the General Counsel at 15, Browning-Ferris Indus. Of California, Inc., & Fpr-II, LLC & Sanitary Truck Drivers & Helpers Locals 350, Int’l Bhd. Of Teamsters
, available at http://www.nlrb.gov/case/32-RC-109684
Brief for Employer BFI at 16, Browning-Ferris Indus. Of California, Inc., & Fpr-II, LLC & Sanitary Truck Drivers & Helpers Local 350, Int’l Bhd, of Teamsters
, available at http://www.nlrb.gov/case/32-RC-109684
13Id at 18 (citing Allied Chem. & Alkali Workers of Am., Local Union No. 1 v. Pittsburg Plate Glass Co., 404 U.S. 157 (1971)
14Id. at 21; Taft- Hartley Act , Pub. L. no. 80-101, 61 Stat. 137 (1947) amending 29 U.S.C. 157 (rejecting the Supreme Court’s decision in NLRB v. Hearst Publications, 322 U.S. 111 (1944) to the extent that it held that the Court held that the Board could ignore common law agency principles in distinguishing employees form independent contractors).
15Lacero Trans. & Warehouse, 269 NLRB 324, 325 (1984) and TLI, Inc. 271 NLRB 798 (1984).
16See e.g. WKYC TV, Inc. and National Association of broadcast Employees and Technicians, Local 42 a/w/ Communications Workers of America, AFL-CIO, 359 NLRB 30 (2012); American Baptist Homes of the West, 359 NLRB 46 (2012); Pressroom Cleaners, Inc. and Service Employees International Union, Local 32BJ, 361 NLRB 57 (2014).