Seventy-odd years ago, the U.S. Supreme Court decided that “newsboys” hawking
In the next few days the National Labor Relations Board may push the law back in the direction of those Hearst newsboys. A closely watched decision in a case involving Browning-Ferris Industries is expected to come out before NLRB member Harry I. Johnson steps down on Aug. 27. The board is likely to determine that workers for an outside contractor who sort materials inside a BFI plant in California are employees, regardless of what BFI thinks.
The BFI case, combined with the NLRB’s decision to hold McDonald’s liable for alleged labor-law violations by independently owned franchise stores, represent the Obama administration’s vigorous effort to knock down the legal barriers separating companies from the workers who toil in their operations. For the administration’s union supporters, the move to declare multiple companies “joint employers” levels the playing field in union negotiating efforts – and offers the promise of millions more dues-paying members to help replenish depleted pension plans.
For franchisors like McDonald’s and companies that use outside contractors, the administration’s effort threatens to impose heavy new costs as well as legal complications. How is a company that bargains vigorously on price with multiple contractors for, say, security and janitorial services, supposed to sit on the same side of the bargaining table when it comes to union negotiations? Can a company be held liable for violations of labor laws by anybody whose workers walk through its doors?
“It’s a case of enormous significance,” said Zachary Fasman, a partner in Proskauer’s labor and employment law department. “The NLRB test for joint employer has been the same since 1984: Does one business exercise direct and immediate control over the terms and working conditions of another business’s employees?”
Now the NLRB wants to use a looser standard, looking at whether “industrial realities” mean a company controls the wages and working conditions of its contractors even though it doesn’t do hire, fire or discipline the contractor’s workers.
Richard Griffin, the NLRB’s general counsel (and former counsel to the International Union of Operating Engineers) laid out the new strategy in a July conference at NYU Law School. The board needs to “acknowledge the changing nature of the workplace,” he said, which perhaps paradoxically means it must return to its “traditional” standards for determining who is an employer.
It’s the job of the NLRB “to adapt to the industrial realities as they develop,” he said, including staffing and employee-leasing firms that supply workers and handle payroll and other jobs for the companies that use their labor. He also cited technology that makes it easier for a franchisor like McDonald’s to track the performance of individual workers across the entire network of company- and franchisee-owned stores and even set job duties and working hours.
“Some franchisors take advantage of that opportunity and go beyond protecting the uniformity of their brand or product,” making them joint employers, he said. Federal law is supposed to encourage collective bargaining and if you have parties who aren’t at the table, he said, “then that’s a problem.”
It’s a problem for companies if they can’t predict how the NLRB will define their role, however. The board cites “industrial realities” including the margins in a particular contractor’s business, for example, which it says can be so low that the company hiring the contractor effectively dictates wages. The board also cites the “potential to exercise control” over workers, whether or not a company exercises it.
“Those are great terms,” Fasman said. “I don’t know what they mean, but they’re great for lawyers.”
One thing is certain: The Obama administration and its allies on the NLRB don’t like temporary staffing and employee leasing companies. In the BFI plant, a staffing firm named Leadpoint supplies 240 workers who sort recyclable materials inside the plant in Milpitas, Calif., while some 60 BFI employees work mostly outside the plant running heavy equipment. The NLRB wants to force BFI to enter into union negotiations with the Leadpoint workers, saying BFI effectively controls those workers by ordering Leadpoint to move them around according to the flow of materials through the plant and leaving Leadpoint little economic room to bargain over wages.
The use of outside contractors “undermines meaningful bargaining by precluding employees from exerting traditional economic pressure on a company that effectively controls many of their working conditions,” Griffin said in his amicus brief in the BFI case.
A group of professors who teach labor and employment law went even further, stating in their amicus brief that “there is precious little evidence” that temporary staffing agencies “serve any national interest.”
“There’s a trend of cases in this new economy that say, `set up the taxes, the payroll, any way you want’” so that companies can avoid liability for the workers in their facilities, said Alan Hyde, a lead author of the brief and a professor at Rutgers School of Law who writes about the challenge of unionization as the economy changes. “People can have two mommies now, and they can have two employers.”
While Griffin says the NLRB needs to “abandon its existing joint-employer standard” in favor of a more flexible one, Hyde said there's no need to change anything because BFI should lose under existing law. BFI’s already considered a joint employer for purposes of multiple state and federal labor regulations, he said, and it should also be required to bargain with the union too.
“How can any union have meaningful collective bargaining if a contractor’s ability to pay is 100 percent a function of how much BFI is willing to pay them?” Hyde asked.
But that test might be difficult to apply consistently in a world where many workers, from computer programmers to Uber drivers, prefer a more unfettered “workplace” where they take assignments from multiple employers when they please and if the money is right. It’s also hard to see how a law firm, say, that hires an outside firm to provide security guards in its building or a Detroit automaker that negotiates a contract with excruciatingly narrow margins with a parts supplier can know whether or not it is a “joint employer” when the union comes around.
Under existing law, “as long as we don’t hire, fire, or discipline, they’re not our employees,” Fasman said.
In the eyes of the Obama administration, nothing can be so simple.
