NLRB Proposes Rule to Prevent Union Abuse of Joint Employer Bargaining

Should a corporation be forced to negotiate alongside contractors or franchisees even if it doesn’t set their workplace standards? Once again, the National Labor Relations Board is attempting to clarify this contentious issue. On September 14, the NLRB issued a Notice of Proposed Rulemaking that would assign a company ‘joint’ or ‘dual’ employer status along with its affiliate “only if the two employers share or codetermine the employee’s essential terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction.” In effect, the board wants to restore a longstanding, and more realistic, definition that predated its Obama-era ruling in Browning-Ferris. Unions, by contrast, want to retain the widened the definition to expand the possibilities for corporate liability for unfair labor practices.

Union Corruption Update has visited this issue several times, most recently this April in the wake of a series of decisions by the National Labor Relations Board. In August 2015, the NLRB, with a 3-2 pro-union majority, ruled that Browning-Ferris Industries (BFI) of California [362 NLRB 1986 (2015)] had to negotiate alongside a labor contractor, Leadpoint Business Services, in future contract talks with Teamsters Local 350. The represented workers were employed at a Milpitas (Santa Clara County), Calif. recycling plant. Leadpoint was the employer. It set wages, benefits, schedules and other worksite labor standards. BFI at most had a peripheral role in these matters. But the Teamsters, knowing that Browning-Ferris had far deeper pockets and thus was more apt to make bargaining concessions, wanted BFI classified as a joint employer. BFI countered that because it did not exercise “direct and immediate” control over the workplace – the standard established by a pair of NLRB rulings back in 1984 – it did not have to negotiate.

Local 350, unable to break the impasse, filed suit against BFI with the NLRB’s Oakland Regional Office. The office in August 2013 ordered a representation election held. Balloting took place the following April. But as including BFI in contract talks would require a board ruling on the definition of dual employer status, the regional office ruled that BFI’s role did not rise to the “direct and immediate control” standard. Hence, the company was not a dual employer. The NLRB office also ordered all ballots impounded until the issue was resolved. The Teamsters appealed to NLRB headquarters in Washington, D.C., where the union was more likely to get a favorable ruling; General Counsel Richard Griffin already had recommended that the board broaden its definition of a joint employer to include potential as well as active control over the workplace.

This led a path to a 3-to-2 NLRB decision in August 2015 in Browning-Ferris favoring Teamsters Local 350. BFI had to join with Leadpoint in negotiating with the union. While admitting that the corporation’s control was not direct and immediate, the board said that it amounted to control all the same. Because major companies often farm out their operations to third parties to avoid negotiating with unions, they effectively become the employers of record even if they choose not to exercise that control. A corporation’s hypothetical workplace authority would be the new standard.

Employers were not happy with the decision, but the election of Donald Trump as president in November 2016 signaled the possibility of a reversal. It long has been unwritten protocol that three of the members of the National Labor Relations Board, operating at full five-member strength, are to be aligned with the party in the White House. Soon enough, a reversal came. In December 2017, the board, by 3-2, ruled in Hy-Brand Industrial Contractors, Ltd. [365 NLRB 156 (2017)] that the older standard should apply once more. Proof of indirect control, said the majority, is not sufficient to establish a joint employer relationship. The majority, consisting of Trump appointees Marvin Kaplan and William Emanuel, along with Chairman Philip Miscimarra, drew heavily upon arguments made by Miscimarra in his dissent in Browning-Ferris.

The restoration would be short-lived. In February of this year, the NLRB vacated Hy-Brand on the grounds that a member of the majority, William Emanuel, previously had worked for a law firm that had represented a party in the case and thus should have recused himself. The ruling in Hy-Brand was far from sweeping anyway. The NLRB actually had sided with an Administrative Law Judge who had concluded that Hy-Brand, a Muscatine, Iowa-based affiliate of the Milan, Ill. (near Rock Island)-based Brandt Construction, qualified as a dual employer along with Brandt, even though the board overturned that decision on merit. Browning-Ferris, meanwhile, remains on appeal.

The ball once again was in the NLRB’s court. The board, now with only four members – Kaplan, Emanuel and Miscimarra’s replacement, John Ring (Republicans) and Lauren McFerran (Democrat) – went about clarifying joint employer status in accordance with the National Labor Relations Act. On September 14, the board published a proposed rule stating that an employer would have a joint status “only if two employers share or codetermine the employees’ essential terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction.” The corporate joint employer, moreover, “must possess and actually exercise substantial effect and immediate control over the employees’ essential terms and conditions of employment in a manner that is not limited and routine.” To emphasize its desire to return to the pre-Browning-Ferris standard, the NLRB cautioned that “even a putative joint employer’s ‘direct and immediate’ control over government terms may not give rise to a joint-employer relationship where that control is too limited in scope.”

Organized labor isn’t thrilled about this latest development. Browning-Ferris opened new possibilities for union organizing and collective bargaining. Private-sector union membership as a share of the total U.S. work force in 2017 was only 6.5 percent, down from more than 30 percent in the late-1950s and about 20 percent in 1983. Labor leaders see a broadened joint employer rule as a way to win large concessions from corporations based on allegedly errant contractor and franchisee practices. Already, they are trying to sink the new rule on procedural grounds. Last Friday, December 7, the AFL-CIO filed a complaint with the NLRB stating that the business groups expressing written support for the rule, including the U.S. Chamber of Commerce and the International Franchise Association, sidestepped board transparency rules. The business organizations, charges the labor federation, unduly influenced the content of the new regulation by keeping their communications with the board secret. The NLRB denies that any business groups secretly influenced the joint employer proposal, insisting that it followed basic procedures in routing petitions to the solicitor’s office. The board added that it did not distribute copies to its members nor did it discourage public comment. The AFL-CIO may have an uphill battle ahead, but it has the potential to delay final publication of the rule by many months.

In a real sense, the unions are resisting a general shift in our work force. Employers and employees alike have greater flexibility with their training, compensation and scheduling when they contract out. A 2014 report by software maker Intuit concluded that by 2020, more than 40 percent of the nation’s workforce, or about 60 million people, will be freelancers, contract employees or temp workers. And a December 2017 NPR/Marist Poll found that one in five current jobs in America is under contract or involves self-employment. Successful startup companies in particular depend heavily on independent contractors. One reason for the success of the U.S. economy is its ability to afford people a wide range of choices. Corralling a large company to the bargaining table for the misdeeds of one or more companies with whom it does business may vastly diminish these choices.