NLRB Ruling Has Big Implications for Franchises

On August 27, the National Labor Relations Board (NLRB) issued a ruling that modified the definition of an employer in the context of franchises and subcontractors.

The NLRB decision came in a case involving waste management company Browning-Ferris Industries and a staffing firm, Leadpoint Business Services, which supplied workers to Browning-Ferris.  The NLRB ruled that Browning-Ferris is a joint employer with Leadpoint.

The board said it will consider factors such as whether a company exercised control over employees “indirectly through an intermediary, or whether it has reserved the authority to do so” in determining whether companies are joint employers. This decision has potentially big implications for the franchise business model by creating a connection between a franchise employee and the parent company/franchisor.

In essence, the employee could be considered employed by both, forcing the parent company/franchisor to sit at the bargaining table should employees decide to collectively bargain for wages and benefits.

Background: The Browning-Ferris Industries case originally grew out of an effort to organize.  The Teamsters, a large labor union representing a diverse set of blue collar and some professional workers, looked to have the company named as a joint employer in order to have it join Leadpoint Business Services at the bargaining table.  This determination would also make it easier for the Teamsters to organize with other staffing agencies doing work at Browning Ferris.

An initial ruling by an NLRB regional director denied joint employer status, however, the Teamsters appealed, and the Board overruled the original decision.  In their decision, the Board stated the Browning-Ferris “exercised sufficient control over hiring, firing, discipline, supervision, and work hours to qualify as a joint employer…”

Today: In making this decision, the NLRB has reverted to a broader definition of what it means to be an employer, a definition that has not been in place since the 1980’s.  Under this broader definition, a lack of “direct and immediate” supervision may no longer be a sufficient method of separating a franchise employee from the parent company/franchisor.

This will most likely not be the end of this case.  Browning-Ferris Industries can appeal the NLRB decision through the circuit courts, and Congressional Republicans have attached a rider to the budget that would block the implementation of a new joint employer standard.

This article was originally posted here.

NLRB Ruling Has Big Implications for Franchises