By Tim Devaney - 08/12/15 06:00 AM EDT
Business leaders in Washington are bracing for a labor ruling that they warn would redefine what constitutes an “employer” in the United States, exposing thousands of companies to new liabilities and potentially upending entire industries.
The National Labor Relations Board (NLRB) is widely expected to rule by month’s end that Browning-Ferris Industries, a Houston-based waste-disposal company, is a joint employer of workers provided to the firm by a staffing agency, experts say. As a result, the company would be forced to collectively bargain with those employees and could be held liable for any labor violations committed against them.
Such a decision could hit companies from a host of industries, including hospitality, retail, manufacturing, construction, financial service providers, cleaning services and security.
The expected action would be the latest in a string of major wins for labor groups under the Obama administration, which has already issued several sweeping executive actions on worker protections and wages.
Backers say it is a necessary step to protect a vulnerable class of temporary workers and independent contractors. But business groups fear the decision will wreak havoc throughout the private sector.
“It has the potential to change the entire way businesses operate in this country,” said Rob Green, executive director of the National Council of Chain Restaurants.
“There are so many business relationships in the economy that rely on companies providing services to other companies,” he added. “So you can imagine that any business sector could be impacted by the decision."
At issue is whether Browning-Ferris is responsible for the treatment of its contractor’s employees. The company hired Phoenix-based Leadpoint Business Services to staff a recycling facility in California.
“Whenever this issue comes up, I always think of that old television show, ‘Who’s the Boss?’ because that’s the question we have here,” quipped Doug Bloch, political director of a California branch of the International Brotherhood of Teamsters.
A regional NLRB director initially ruled in favor of Browning-Ferris, which opposes the joint-employer designation. But the Teamsters union, which is representing the workers, is appealing the case to the National Labor Relations Board.
The Democratic-controlled NLRB, which has a history of ruling against business during the Obama administration, is expected to overturn the decision and side with the workers.
Observers believe the decision is likely to come before Republican board member Harry Johnson’s term runs out at the end of the month. While Democrats on the five-seat board could push through the decision on a 3-1 vote following the end of Johnson's run, doing so could open up the agency to criticism over issuing such a sweeping ruling when it is not at full strength.
The decision would carry more weight if it came from a full board, explained former board member Brian Hayes.
Businesses say they are bracing for the worst. Some warn they will cut ties with staffing agencies that help recruit temporary workers, and subcontractors that provide janitorial and security services. They say they will bring those jobs in-house so they have more control over the situation.
“Every company will have to reexamine their business relationships,” said Michael J. Lotito, an employment and labor attorney. “I’d rather be responsible for my own company than someone else’s.”
Restaurants could suffer the biggest hit from the ruling.
Franchise owners who take on the risks of opening up local branches of restaurants, like McDonald’s and Burger King, could go from “being their own boss to being a glorified manager,” said Angelo Amador, senior vice president of the National Restaurant Association.
Currently, corporations like McDonald’s take care of the marketing, but leave decisions about wages, hours and hiring to the local franchise owners, business groups contend.
“This is the model franchises have been based on in our country since the time of Benjamin Franklin, who was the first franchisor,” said Robert Cresanti, executive vice president of government relations at the International Franchise Association.
But the NLRB’s ruling could turn the franchise model “on its head,” Green said.
The Browning-Ferris decision could also be a “roadmap” for another case before the labor board that will determine whether McDonald’s Corp. is a joint employer, Lotito said.
In the McDonald’s case, the labor board will determine whether the restaurant should be responsible for labor violations committed by independent franchise owners.
The NLRB’s top lawyer filed charges against McDonald’s last December, accusing the burger joint of illegally retaliating against employees who participated in union-related activities.
Though many of these alleged labor violations were committed by franchise owners, NLRB General Counsel Richard Griffin contends that McDonald’s Corp. should be equally liable as a joint employer.
An NLRB administrative law judge is currently weighing the McDonald’s case, but the decision will almost certainly be appealed.
If the pending cases put companies on the hook for labor violations committed by franchise owners, they will likely insist on asserting more control over local restaurants, experts say.
“All of the sudden, a local business person who has built a franchise up for 20 years is a middle manager,” said Dan Martini, manager of legislative affairs at the National Federation of Independent Business (NFIB).
This could discourage many entrepreneurs from opening a franchise, for fear of too much corporate interference.
“Some people like being their own boss and don’t want to be told how to run their own business,” Amador said. “They want to be able to make the decisions about pricing, when they open, when they close, who they hire, who they fire.”
The implications of the Browning-Ferris decision would extend far beyond the golden arches, potentially impacting all manner of arrangements between businesses, experts say.
Labor groups argue that the joint-employer designations are needed to tamp down on the practice of using staffing agencies to provide “permanent temps.” Companies exploit these relationships so they can shirk their responsibilities as employers, they allege.
Under current labor law, companies are only liable for employees over whom they exert direct control by setting their hours, wages and job responsibilities. They can get around this requirement by working with staffing agencies to recruit temporary workers or hiring subcontractors to complete a job.
Oftentimes, the staffing agencies and subcontractors provide little to no supervision of these employees, so they argue they shouldn’t be considered their primary employer either, labor advocates say.
Many workers, they argue, get caught in the middle.
“When companies are pointing fingers at each other, the workers feel like they have no recourse,” Bloch said.
“The understanding used to be, ‘If you work for me, I will take care of you,’” he explained. “Now, it has changed so you don’t even know who you work for, and if something happens, ‘Sorry.’”