In August, the National Labor Relations Board (NLRB) ruled that Browning-Ferris Industries, a recycling company that used a staffing agency to provide workers, was considered a “joint employer” along with the staffing agency, and is obligated to jointly negotiate with the union about working conditions.
Although the ruling did not directly address franchising — the business model that many fast food chains rely on — the so-called joint employer standard it established will be applied to closely-watched cases the labor board has brought against McDonald’s that allege various violations of workers’ rights. Most of those cases, which date back to 2012, have been consolidated and are slated to be heard by an administrative law judge in Manhattan starting in January. In 2014, the NLRB’s general counsel determined that in some of those cases, McDonald’s could be considered a joint employer.
Under the standard, if workers at a local franchisee were to unionize, they could negotiate wages, benefits and other working conditions not just with the owner of a local franchise, but also with the larger corporations like McDonald’s. And these corporations could be held jointly responsible for labor violations.
“This is a knife-to-the throat issue for the franchise model,” Matt Haller, a lobbyist at the International Franchise Association, said of the NLRB ruling. “But it’s not just franchising. You’d be hard pressed to find a business that shouldn’t be concerned about the impact of this joint employer standard.”
In franchising, an individual or group — the franchisee — pays a fee to the franchisor, such as McDonald’s, to own and operate a store under the larger company’s name.
The business community says the new standard creates uncertainty over who is considered an employer and impedes the ability of franchise owners to run their businesses independently, which will hurt not just the fast food industry, but other sectors that rely on contractors and franchisees such as retail, hospitality and construction.
Advocates for unions and low wage workers say the outcry from the industry groups is unwarranted and that the joint employer standard merely requires another employer to be at the bargaining table.
“The sky-is-falling attitude the employer associations have taken is unwarranted and perhaps adopted more for political reasons than practical reasons,” said Teague Paterson, the attorney for the Teamsters union in the Browning-Ferris case.
“There’s nothing radical or anti-business about the [Browning-Ferris] decision,” said Cathy Ruckelshaus, general counsel for the National Employment Law Project (NELP), which advocates for the rights of low wage workers and filed an amicus brief in the Browning-Ferris case, siding with the Teamsters. “It just means that if [a company] decides to subcontract out to a staffing company or labor contractor, [it] may be responsible for working conditions, along with the contractor.”
The latest venue for this fight between business and labor will be the upcoming year-end omnibus spending bill that needs to enacted by Dec. 11 to avoid a government shutdown.
The business groups are openly calling for Congress to include language in the bill that would prevent the NLRB from implementing the Browning-Ferris decision.
“We are urging Congress to include those riders because it provides the business community and all employers a degree of certainty on how they can operate the business and who their employees are,” said Brian Crawford, a lobbyist for the the American Hotel & Lodging Association. “When you think about the exponential number of contractual relationships that could potentially trigger joint employer liability under this new standard, it really is eye-opening how far-reaching this decision could potentially be.”
Most Democrats are likely to oppose the provision and if it is included, the language could draw a veto threat from President Obama.
But the business groups are hoping that the must-pass nature of the spending bill will outweigh the eagerness of congressional Democrats and the White House to take a stand on the issue.
Even if the lobbying push is unsuccessful this year, the issue is being teed up for the future and has even made its way into the 2016 presidential campaign.
Republican presidential hopeful Sen. Marco Rubio of Florida is highlighting on his campaign Web site that, if elected, he will reverse the labor board’s decision and “return control to small businesses.”
The franchise association’s opposition to the joint employer standard began taking shape in January when it created the Coalition to Save Local Businesses to build a broader network for support among industry groups. Its lobbying efforts accelerated in the two months since the Browning-Ferris decision.
“The case hadn’t been decided so there was nothing to lobby for,” Haller said. “We had to wait until post-Browning Ferris to have a direct ask.'”
The coalition is backed by the U.S. Chamber of Commerce, National Association of Manufacturers, American Hotel & Lodging Association, and dozens of other businesses and trade groups.
The coalition is expanding its lobbying efforts at the state level, trying to gain support from pro-business Democrats in Maryland, Virginia, Indiana, North Dakota, Oregon, Colorado, Florida and Maine. There, they are reaching out to elected officials, manufacturers, hotels, restaurants and local business groups, in addition to writing op-eds and airing ads featuring local franchise owners saying they don’t wan’t to cede control over their employees to big franchisors, like McDonald’s.
On Friday, they are bringing in several local franchise owners and electrical contractors to meet in Washington with legislators from Maryland, West Virginia and Virginia.
The lobbying efforts are yielding limited results so far.
In September, Republicans in both chambers introduced legislation that would essentially invalidate the labor board’s ruling by significantly narrowing the definition of a joint employer to one that has “actual, direct and immediate” control over workplace conditions, as opposed to sufficient or indirect control. Such a standard would make it more difficult for any company to be considered a joint employer.
The House bill, introduced by Rep. John Kline (R-Minn.), cleared the House Committee on Education and the Workforce in October with a vote of 21-15. Its companion bill in the Senate, introduced by Sen. Lamar Alexander (R-Tenn.), has yet to get a vote in the Health, Education, Labor, and Pensions Committee.
Now, the business coalition smells a fresh opportunity to get Congress to act in the coming weeks through the year-end spending bill.