Federal Agency Tries to Extend Reach with Joint Employer Standard

The National Labor Relations Board (NLRB), the federal labor law enforcement agency, is likely planning to vastly expand its reach through a rulemaking on something called the “joint employer” standard. The proposed change would make companies responsible for workplace violations at pretty much any other company they do business with. It would be the third time in as many presidential administrations that the rule has been changed.

Granted, the NLRB hasn’t specifically said what it plans to do with the joint employer rule. However, The last time the board had a Democratic majority, it had one it tried to ditch the current version of joint employer rule, which says that a business must have “direct control” over another business’ workplace policies in order to be liable.

Direct control was the standard for decades. It makes intuitive sense; if a company controls another company’s workplace policies, then the controlling company should be just as liable. That usually applies in cases in which a company is a subsidiary of a larger one or when a company subcontracts work—in short, cases where it is clear who is calling the shots.

In its place, the board is expected to propose the standard to become “indirect control,” a vague standard that would theoretically put any business that has any kind relationship with another company on the hook for the latter’s violations. That’s what the previous board changed the rule to during the Obama administration. The NLRB restored the original direct control standard when it gained a Republican majority during the Trump administration.

The NLRB announced it was planning a new joint employer rule last year and recently reaffirmed that that remained at the top of its regulatory agenda. The board’s effort would mark third time in as presidential administrations that the rule has been changed around. It has been steadily reversing the board’s other Trump-era decisions and rulemakings. 

The board has added reason to try to push it through via the rulemaking the process. For a while, it looked as if Congress might address the issue, but that now doesn’t seem likely. The pro-union Protecting the Right to Organize Act, which would have rewritten the National Labor Relations Act to make indirect control the standard, has stalled in Congress.

Why the push to change the rule at all? Its existence has frustrated unions because it made one major business sector extremely hard to organize: corporations that franchise. How franchising is done can vary, but in most cases the corporation is merely renting out its brand. Contrary to what many people may think, their nearby McDonald’s restaurant probably isn’t owned the corporation. The vast majority of the restaurants that bear its name are small, locally owned businesses that have deals to sell the corporation’s products and get the benefits of its national advertising. The same is true for most chains, whether its restaurants, hotels, gyms, or other businesses.

That means that unions are forced to organize each franchise individually, as we are currently seeing with the Starbucks unionization push. However, if the franchisor corporation were deemed to be in control of its franchisees, then unions could run what’s called a “corporate campaign” to pressure the franchisor into accepting unionization. That would organize the workers for franchisors and the franchisees all in one fell swoop, which would give a huge organizing advantage to unions.

The NLRB demonstrated what this would look like in 2014, when it pursued an unfair labor practice (ULP case against McDonald’s corporation, arguing it was a joint employer with all of its franchises, consolidating 181 separate ULP cases concerning local restaurants. The case lingered into the Trump administration, and the GOP-majority board settled it last year without declaring that McDonald’s was a joint employer.

In short, it looks like joint employer is going to be an issue that switches with each change of the board’s majority for years to come, or at least until Congress steps in and pass legislation that settles the issue one way or another.