Trump Administration Moves to Limit Franchiser Labor Liability 

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From Bloomberg LawHassan A. Kanu reports that the National Labor Relations Board proposed a new definition of “joint employer” that would make it less likely for a company to be found to be a joint employer. The proposed rule would make it less risky for companies to hire independent contractors through a intermediary such as a staffing company. Hassan writes

The federal labor board wants to limit companies’ responsibility for workplace law violations by franchisees, staffing businesses, and other affiliates.

The National Labor Relations Board Sept. 13 proposed a new regulation to resolve the hotly contested issue of when one business is considered a “joint employer” of another’s employees. Joint employers can be forced to collectively bargain with affiliated workers and be made liable for unfair labor practices against those employees.

The board’s proposal—requiring direct control of workers—likely would mean that fewer businesses could be tagged as a joint employer. It would largely revert to a looser standard in place before the Obama board in 2015 said a business can be a joint employer if it exerts indirect control over workers, including by imposing brand management and other standards.

The rule impacts a huge swath of businesses, including those in the gig economy, and many companies that rely on contracting or subcontracting out some of their work. McDonald’s USA LLC is currently defending a case alleging that it’s a joint employer of workers at franchisee restaurants, which the company’s attorneys said could threaten the fast food business model itself. Microsoft has also faced bargaining demands from workers hired by a staffing firm.

“The Chamber has been calling for a reversal of the unworkable, sweeping joint-employer standard issued under the previous administration,” said U.S. Chamber of Commerce senior vice president Glenn Spencer said in a written statement. “We applaud the NLRB for taking this critical step.”

The board’s proposal, which will be published in the Federal Register Sep. 14, would require companies to exercise substantial, “direct and immediate” control over the most important terms of a workers’ job, like discipline or the power to hire and fire, to be considered a joint employer.

That’s a reversal from the current standard, under which a business can be a joint employer even if its control over the essential working conditions of another business’s employees is indirect and limited. The board tried to reverse the existing rule in a previous case decision, but had to withdraw the opinion because of conflict-of-interest questions surrounding Member William Emanuel’s (R) work as a management attorney before joining the board.

“After getting caught violating ethics rules the first time, Republicans on the Board are now ignoring these rules and barreling towards reaching the same anti-worker outcome another way,” Sen. Elizabeth Warren (D-Mass) told Bloomberg Law via e-mail, shortly after the NLRB’s filing. “This is what it looks like when President Trump’s corrupt Washington works for corporations instead of working families.”

The NLRB declined Bloomberg Law’s request for comment.

Issue Implicates Many Businesses

The five-member board was controlled by a majority of former President Barack Obama ‘s nominees when it shifted its approach to joint employment in 2015. The Obama-era board said it expanded the test to includes indirect control because of the changing nature of employment and rise of complicated staffing and other contractual work arrangements.

The board, which hears unfair labor practice complaints and reviews unions election disputes, often swing back and forth on labor policy questions depending on which party holds the majority. President Donald Trump ‘s picks to the board, including Chairman John Ring (R), have set about reversing a series of major policies from the previous 8 years.

“Under the proposed regulation, an employer may be considered a joint employer of a separate employer’s employees only if the two employers share or codetermine the employees’ essential terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction,” the NLRB said in the notice. “More specifically, to be deemed a joint employer under the proposed regulation, an employer must possess and actually exercise substantial direct and immediate control over the essential terms and conditions of employment of another employer’s employees in a manner that is not limited and routine.”

The importance of the question is illustrated in the McDonald’s and Microsoft cases. The complaint against McDonald’s was filed by workers at individual store locations, who are directly employed by a McDonald’s franchisee. Unions seeking to organize fast food workers argue that the corporate parent has enough control over those workers to force it to the bargaining table, or hold McDonald’s LLC liable for interfering in union organizing efforts. That case is still ongoing

Read the full story at  Trump Administration Moves to Limit Franchiser Labor Liability (1) (Corrected)

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