“This rule will allow companies to manipulate the system to limit people’s freedom to negotiate for fair wages and benefits by hiring contractors to serve as a shield between the companies and their obligations to employees.” — AFL-CIO President Richard Trumka

WASHINGTON—A new National Labor Relations board rule published Feb. 26 will make it much more difficult for workers to organize unions or challenge labor-law violations if they are hired by a franchise, contractor, or temporary staffing agency.

The rule, which will go into effect April 27, nullifies a 2015 NLRB decision that expanded when companies who rely on workers hired by third parties can be held responsible as a “joint employer.” It declares they can’t be unless they have “substantial direct and immediate control” of “essential terms and conditions” such as hiring, firing, and pay, the board says. “Importantly, the final rule also makes clear that the routine elements of an arm’s-length contract cannot turn a contractor into a joint employer.”

In practice, that would mean Amazon could probably not be held responsible for safety violations at a warehouse that is run by an outside logistics contractor that hires workers through a temp agency, and McDonald’s workers trying to organize a union would only be able to bargain with the franchise owner.

“This rule will allow companies to manipulate the system to limit working people’s freedom to negotiate for fair wages and benefits by hiring contractors to serve as a shield between the companies and their obligations to employees,” AFL-CIO President Richard Trumka said in a statement. “It is a step backward in modernizing our outdated labor laws, by empowering corporations and special interests instead of supporting rules that will level the playing field and reflect the true nature of today’s economy.”

“The onus is on the worker to prove direct control. It’s an incredibly difficult standard to meet,” Celine McNicholas, director of government affairs at the Economic Policy Institute, told LaborPress. “It incentivizes further fissioning and complicated contracting relationships to get out of following the law.”

When companies can be treated as joint employers has become a major area of dispute in labor law, as more and more companies key areas of their operations. 

“The Board seeks to narrow its joint employment standard at a time when companies in low-wage sectors are increasingly using temporary and staffing agencies to source their labor,” the National Employment Law Project said in comments submitted to the NLRB in January. “In many fast-growing industries—including warehouse and logistics, janitorial, hospitality, waste management, and manufacturing—outsourcing has become deeply entrenched.”

The 2015 NLRB decision involved the Browning-Ferris Industries recycling company. It hired workers at a California plant through a temp agency and then refused to bargain with the Teamsters Union, on the grounds that the temp agency was the workers’ employer. The board noted that BFI set maximum pay rates, shift schedules, production goals, and how many workers should be assigned to specific tasks, and held that while it didn’t exercise “direct” control, it had “sufficient” control to be treated as a joint employer.

“Of all the essential terms and conditions that are the subject of mandatory collective bargaining, the Board lists only control over ‘hiring, firing, discipline, supervision, and direction,’ aspects of the employment relationship that are virtually always delegated to contractors in subcontracting relationships,” NELP said. In the BFI case, it noted, the “the work was performed in the Browning-Ferris plant on a line owned and run by Browning-Ferris,” and BFI had the ability to control “applicant screening requirements, and thus hiring and firing of workers; wages, by capping the amounts workers were to be paid; and the production line speed, which determined how fast the workers must work.” 

Coupled with a similar rule announced by the Labor Department in January, it amounts to a “one-two punch” and a “full-on assault” on wages and unionization, says McNicholas. “If you can’t bring all those parties to the bargaining table, you are never going to get a collective-bargaining agreement that satisfies workers.”

The EPI estimates that the rule will cost workers $1.3 billion in lower wages.

Limiting union power is the point. The new rule is important, the NLRB says, because if a company is deemed a joint employer, it must participate in collective bargaining if employees are represented by a union; picketing directed at it “that would otherwise be secondary and unlawful is primary and lawful”; and each business involved may be found liable for the other’s unfair labor practices.

Because this, the board states that the purposes of the National Labor Relations Act “are not furthered by drawing into a collective-bargaining relationship, or exposing to secondary coercion and joint- and-several liability, a direct employer’s business partner that does not actively participate in decisions setting employees’ wages, benefits, and other essential terms and conditions of employment.”

“As our economy continues to flourish under Republican pro-growth policies, I applaud the NLRB for finalizing this long-overdue rule, which will allow more Americans to pursue the American Dream free from unnecessary and burdensome union harassment and government red tape,” Rep. Virginia Foxx (R-N.C.) said in a statement.

The rule is the second attempt by Donald Trump’s appointees to the NLRB to reverse the Browning-Ferris decision. Their December 2017 ruling was voided two months later after the board’s top ethics officer held that member William J. Emanuel should have been disqualified because he had been a partner in the law firm that represented BFI’s temp agency.

“This final rule gives our joint-employer standard the clarity, stability, and predictability that is essential to any successful labor-management relationship and vital to our national economy,” NLRB Chairman John F. Ring said in the announcement. “Unions will have clarity regarding with whom they have a collective-bargaining relationship.” 

“The predictability is that workers won’t be well served,” McNicholas responds.

For example, the rule would likely insulate McDonald’s from being a joint employer of workers at its franchises—the Labor Department rule specifies that “an employer’s franchisor, brand and supply, or similar business model” do not determine joint-employer status—although the company coordinated a campaign to help its franchisees defeat union organizing, connecting them with “union avoidance” consultants and law firms.

The new NLRB joint employer rule is just the latest example of the Trump Administration doing McDonald’s bidding,” Milwaukee McDonald’s worker Jennifer Berry said in a statement released by Fight for $15 and a Union. “But workers like me know who our boss is: McDonald’s. We wear the company’s uniform, serve its Big Macs and fries and help make its billions in profits possible.”

“Under this final rule, employees of a temp agency will be prevented from collectively bargaining for higher wages with all the companies who have the power to give them a raise,” House Education and Labor Committee Chairman Bobby Scott (D-Va.) said in a statement. “This rule reinforces the need for the Senate to pass the Protecting the Right to Organize Act, which codifies the traditional joint employer standard.” 


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