Saturday Q&A: How NLRB muddled the joint employer standard

Trey Kovacs is a policy analyst focusing on labor issues for the Competitive Enterprise Institute, a Washington, D.C., think tank. He spoke to the Trib regarding problems businesses are encountering after the National Labor Relations Board recently changed joint employer regulations.

Q: Why did the NLRB change this regulation and what's been the effect?

A: Under the reworked joint employer standards, a business and its contractor or franchisee can be held jointly responsible for labor violations and collective bargaining. What happened was that last year in (a decision involving) Browning-Ferris (Industries), (the NLRB) changed what was a bright-line rule of one company exercising direct control over another company and they would both share joint employer liability.

In the Browning-Ferris case, they changed that definition to include indirect control or possessing unexercised potential control over another workforce condition, such as hiring, supervision and wages. Unfortunately, since that decision the NLRB hasn't issued any guidance to explain what indirect control means. So it really creates a vast amount of uncertainty for employers to know what kind of business relationships they're allowed to have to escape this joint employer liability.

Q: Why was the change made?

A: The NLRB wanted to change the standard because it basically wants larger businesses to be found liable for labor violations of smaller businesses. (The NLRB) says business has changed and the use of contracting and temporary staffing agencies and franchising is a way for big companies to escape liability.

Q: Is the change also damaging to small businesses because it might make larger businesses less inclined to work with them?

A: Yes, absolutely. If you think businesses are too big now, they're going to get even bigger. Instead of outsourcing noncore functions, whether it's the receptionist, accounting or whatever, they're going to bring those back in-house. That's going to give fewer opportunities to entrepreneurs in small businesses to strike out on their own.

Q: Is this something that can be reversed by a new presidential administration?

A: Whoever holds the executive office gets to appoint a majority of (NLRB) members. So basically all that would need to happen would be a case to come before the NLRB under a Republican administration and this new joint employer standard could be overturned. But that's a lot of what's wrong with labor laws — they flip-flop depending on the party in charge and that creates immense amounts of uncertainty.

The joint employer standard was a 30-year precedent that had worked well for all parties. You know big businesses that wanted to focus on whatever their core functions were could do that and contract out things that they weren't as concerned with to other companies, which allowed small businesses to thrive and create jobs. There was no basis for overturning this rule other than to make it more difficult for businesses to have relationships with each other.

Read the full article at Trib Live