Ruining countless August vacations this week, the National Labor Relations Board’s Democratic majority handed down a new joint-employer standard that radically rewrites U.S. labor law and upends thousands of business relationships. The majority asserts that throwing out three decades of legal precedent is necessary “to encourage the practice and procedure of collective bargaining.” Labor unions are celebrating a decision sure to harm diverse industries in every state.
The new rule emanates from the board’s watershed Browning-Ferris decision on Thursday in which a 3-2 majority held that waste recyclery Browning-Ferris was a joint-employer of its subcontractor Leadpoint’s workers.
In 1982 the Third Circuit Court of Appeals established in the landmark NLRB v. Browning-Ferris Industries of Pennsylvania case that a joint-employer must “share or co-determine those matters governing essential terms and conditions of employment” (our emphasis). The NLRB formally adopted this standard in two 1984 decisions.
In TLI, Inc., the board cited “hiring, firing, discipline, supervision, and direction” as essential terms that “meaningfully” affect the employment relationship. The board has since clarified that “limited and routine” supervision does not qualify as “meaningful.” Both the Third and Second Circuit Appellate courts have upheld this standard on review.
The board’s Democratic majority laments that employers are turning to subcontractors and temp agencies to skirt collective-bargaining. But many employers would be contracting out work anyway. Why would a tech company want to manage its janitors?
Now, under the new joint-employer rule, a business needs only to exercise “indirect” control over workers to be dragged into labor disputes and negotiations. As applied by the majority in Browning-Ferris, there is no limiting principle on the rule’s reach.
Browning-Ferris and Leadpoint employed separate supervisors and maintained distinct human resource departments. Leadpoint recruited, interviewed, hired and trained employees. The subcontractor also chose which workers to dispatch to the recyclery and assigned personnel to specific posts. Leadpoint unilaterally determined compensation and retained sole responsibility to discipline, review and fire workers.
The terms and conditions of Browning-Ferris’s relationship with Leadpoint are typical for innumerable American business contracts. Yet the majority asserts that Browning-Ferris exercised indirect control over the wages of Leadpoint workers by agreeing to pay the subcontractor a specified mark-up, among other dubious claims. Potentially, this NLRB ruling could extend to any business that uses a subcontractor or temp agency. Parent companies could be on the hook for subsidiaries and affiliates. The rule could cover any American who employs a worker through a landscaping, catering, plumbing or housekeeping service.
A major goal of the new rule is to pit corporate parents against their franchisees in collective bargaining. Last year NLRB General Counsel Richard Griffin directed thatMcDonald’s be charged as a joint-employer in dozens of unfair labor practice complaints against franchises. Unions say corporations should be on the hook for their franchisees’ workers because computer systems can monitor sales and labor costs.
But under the new rule, there’s no limit on the number of parties that could be seated at the bargaining table. For example, West Coast tech companies such as Apple, eBay andYahoo have contracted with the same private bus service, which the Teamsters have unionized. Would all these companies have to bargain individually with the Teamsters? What if they disagree? Could eBay’s labor agreement override Apple’s bus contract?
The majority dismisses the Republicans’ dissent as a “law-school-exam hypothetical of doomsday scenarios.” Perhaps the board had to pass the rule to find out what it does. Nor does the majority consider its economic implications. “It is not the goal of joint-employer law to guarantee the freedom of employers to insulate themselves from their legal responsibility to workers,” the majority writes.
There is Congressional support in both parties for rolling back the rule, but not enough to overcome a Senate filibuster or veto. Federal courts have often rebuked agencies for rewriting law. In the 2012 case Christopher v. SmithKline Beecham Corp., the Supreme Court reprimanded the Department of Labor for departing from long-established rules controlling business practices when there are “potentially massive” economic implications for “conduct that occurred well before that interpretation was announced.”
But Browning-Ferris can only appeal the board’s decision after the Teamsters win a union representation election. The tortuous legal process could take more than two years to work through the courts. Meanwhile, the ruling will cast a pall over the employment relationships of thousands of businesses and their workers.
The Obama NLRB majority is a case study in unaccountable government. And people look for reasons why the country is so divided. This agency’s overreaching is one of them.