A landmark federal labor ruling on Thursday vastly expanded the definition of corporate employee and could end the arms-length relationship that companies such as McDonald’s have historically had with their franchisees’ employees.
With its ruling in a case involving Browning-Ferris Industries and employees at one of its subcontractors, the National Labor Relations Board redefined what it means to be a “joint employer.”
The new standard is important because corporations could be held liable for labor law violations by their subcontractors and could be forced to the bargaining table by unions seeking to organize the employees of a subcontractor or franchisee.
Business groups blasted the 3-2 ruling, calling it a “seismic shift” in the employer definition that could alter the face of American businesses, while unions hailed a victory.
Wilma Liebman, a former NLRB chairwoman, said the decision is a victory for workers because it expands the universe of companies that can be considered joint employers and a home run for unions that pushed for the joint employer standard to be expanded.
“The employer can’t say, ‘It’s the subcontractor’s responsibility,’” she said.
The far-reaching implications of the decision stem from a 2013 election petition by the Teamsters union, which sought to represent workers at a Browning-Ferris recycling facility in Milpitas, Calif. The workers were employed by Leadpoint Business Services, a subcontractor, to sort out recyclable items and clean the facility.
The petition triggered the question of whether Browning-Ferris and Leadpoint were joint employers. An NLRB regional director found that they were not joint employers because they did not share direct and immediate control over conditions of employment, such as hiring, firing and disciplining workers.
The union appealed the decision, which led to the five-member national board decision. The ruling means that ballots cast in a union election will now be unsealed and counted.
Experts say the case will eventually be appealed and could reach the Supreme Court.
Labor law experts say the board’s new joint employer standard has implications for companies such as McDonald’s.
“McDonald’s is the boss — that’s true by any standard,” Kendall Fells, organizing director of Fight for $15, said in a statement. “The company controls everything from the speed of the drive-through to the way workers fold customers’ bags. It’s common sense that McDonald’s should be held accountable for the rights of workers at its franchised stores.”
McDonald’s said the ruling pertained to Browning-Ferris and its subcontractors, not McDonald’s.
“At McDonald’s, we do not direct or co-determine the hiring, firing, wage rates, hours or any other terms of employment of our franchisees’ employees — which are the well-established criteria governing the definition of a ‘joint employer,’” said an emailed statement from McDonald’s spokeswoman Lisa McComb.
Richard Adams, a California-based consultant for McDonald’s franchisees, said the decision flies in the face of the franchise model, which relies on franchisees’ ability to oversee their own employees. It also makes the employer company “the deep pockets” in terms of liability, he said.