The NLRB’s Emerging, Disastrous Joint-Employer Cases

Franchise businesses provide us food, tax preparation, daycare, and gasoline. Many of us have worked a temporary job or know someone who has. Businesses commonly outsource accounting, human resources, and cleaning. Our cars are manufactured with parts sourced from smaller businesses. Our homes are constructed with subcontractors plumbing the bathrooms and wiring the fixtures. All are at risk from Obama administration overreach to redefine who our employers are.

The National Labor Relations Board recently began hearings for more than 60 consolidated lawsuits brought by several unions and union-affiliated groups against fast-food giant McDonald's and several of its franchisees. The suits claim franchisor McDonald's USA and certain franchisees jointly employed and retaliated against protesting pro-union workers.

The first of three joint-employer hearings began on March 30 in Manhattan, with upcoming hearings in Chicago and Los Angeles. NLRB Administrative Law Judge Lauren Esposito is presiding over all three hearings. Thousands of small businesses — and jobs — are on the line as this rogue federal agency puts on trial many tried-and-true American business practices, including franchising, temporary staffing, outsourcing, sourcing, and contracting.

These practices give businesses a leg up. For example, franchising helps by providing an established brand, marketing and tested business methods. Notably, minority-owned franchise businesses succeed at a rate 44 percent higher than that for non-franchise businesses.

In his influential book, "The Fissured Workplace," U.S. Department of Labor Wage and Hour Administrator David Weil recognizes that these practices help businesses focus on core competencies to achieve productivity gains and tailor goods and services to meet consumer tastes. However, franchising, temporary staffing, contracting and outsourcing make it difficult for workers, through unions, to bargain collectively over wages, safety and benefits, Weil and NLRB General Counsel Richard Griffin claim.

Seeking to curtail these business practices, Griffin writes, "Employees should expect that their bargaining representative be capable of addressing their employment conditions with the entity that realistically has the power to implement those terms." In spite of the 1947 U.S. House Committee Report for the Taft-Hartley Act admonishing the NLRB for giving "employee" "whatever meaning it wished," Weil and Griffin are pushing a radical redefinition of "employee" in order to ease unionization.

Under current law, two businesses are deemed joint employers when they both actually exercise substantial, direct and immediate control over hiring, firing, disciplining, supervising and directing workers. Now Griffin is trying to expand that definition to add indirect control, unexercised potential control and "economic and industrial realities." The change would abandon the present standard's fact-based inquiry for an exercise in hypotheticals. The "realities" criterion is a catch-all category that could ensnare many businesses simply by claiming that an "employer" is essential to collective bargaining.

For a homeowner who hires a painting company, the realities test simply argues that the painters couldn't receive higher wages unless the homeowner was to pay the painting company more. The homeowner would be deemed essential to collective bargaining and thus a joint employer subject to the union's contract with the painting company and liable for paying the painters if the painting company executive were to skip town with the fee.

Under the Griffin-Weil plan, workers for franchisees, staffing agencies, contractors and suppliers would typically be jointly employed by the franchisor, lead company or manufacturer.

Joint employment designation has major consequences.

First, businesses designated as joint employers can be unionized more easily. Unionizing one business forces the other business to the collective bargaining table too.

Second, joint employers can be sued more readily because they share liability for employees' actions. Trial lawyers would have more parties and deeper pockets to sue.

Third, Griffin and Weil intend to give unions "economic weapons" — pickets, protests, and boycotts — which have been prohibited for use against third parties that now stand to be redefined as joint employers. Unions would then be allowed to pressure these third-party businesses into granting union recognition via signed cards rather than secret ballots, giving unions access to business premises, and signing "neutrality" agreements to not oppose union organizing in exchange for unions not deploying these weapons. These attacks can be very effective, because, as Weil notes, "lead (big) businesses are sensitive to reputational attacks."

Fourth, expanding the joint-employer standard could cause big employers to bring in house more services, leaving smaller businesses fewer opportunities.

Weil's purpose is clear: to help unions achieve the "higher wages and benefits that large enterprises typically provide." Weil preaches a "top-focused" strategy attacking industry leaders like McDonald's to bring others in line — despite McDonald's having the best overall compliance record of the top 20 brands.

Regular Americans stand to lose a lot, including choice in the marketplace and job opportunities. Congressional action is needed to bring relief to businesses and workers who would suffer as a result of the NLRB's blatant and unwarranted union advocacy.