Big biz warns NLRB 'joint employer' rule goes beyond franchising

BY SEAN HIGGINS | MARCH 21, 2015

The National Labor Relations Board charged the McDonald's Corp. as a "joint employer" with its...Business groups are warning that a recent move by the National Labor Relations Board, the federal labor law enforcement agency, to expand the legal definition of a "joint employer" is likely to affect much more than just federal labor law.

The move could spur other federal agencies and civil courts to use a similarly broad standard for defining what an employer is in enforcing any law related to the workplace, such as the Occupational Safety and Health Act or equal opportunity laws.

The Chamber of Commerce, the nation's leading business lobby, made the case at a forum hosted at its headquarters Friday and in a new study it released the same day. The Chamber's experts warned that there was already signs that the new standard the board has called for was being adopted elsewhere by the government.

"Even if we win here [against the board], we could still find ourselves under the gun regarding the joint employer standard," said Robert McDevitt, senior vice president of franchising for Golden Corral restaurants, a panelist at the event. "To a large extent, the horse is already out of the barn."

In December, the National Labor Relations Board charged the McDonald's Corp. as a "joint employer" with its individual franchises in a series of unfair labor practice complaints, in effect, arguing that the worker plaintiffs had two bosses: the local business that paid them and the corporate parent. The board's general counsel, Richard Griffin, argued that the corporation's franchising contracts gave the company enough "indirect control" over the restaurants' daily operations that they were in effect an employer.

The move and the board's arguments defending it have alarmed business groups since franchises were previously understood to be legally separate businesses most are local entrepreneurs who contract for the right to use the corporate brand. The board's critics, including the Chamber, have warned that the move will undermine franchising. Corporations will either refuse to accept the extra liability or demand control over the franchises, which the local owners won't want to relinquish.

The Chamber expanded its argument Friday, warning that other federal agencies could adopt the same standard for measures such as the the Civil Rights Act or the Americans with Disabilities. Those laws use the same basic language as the National Labor Relations Act to define an employer.

"By loosening the joint employer standard, employer coverage under such statutes would explode. This would essentially eliminate carefully negotiated small business exceptions in these federal statutes," the chamber argued in a study released Friday.

Glenn Spencer, vice president of the chamber's Workforce Freedom Initiative, warned that the "indirect control" standard could be applied to any number of business relationships. "If you have a supplier where you are the main customer... then you become the joint employer under that standard," Spencer said. That's because in that scenario, the supplier's dependency on the customer gives the customer influence over the supplier's hiring and firing.

That, in turn, would attract litigation, the critics argue. "When you have ambiguity in statutory language it invites litigation and regulatory overreach," said Paul DeCamp, a management-side labor lawyer.

The chamber's report argued that the board's standard could, for example, come into play in cases involving Obamacare. That law requires employers of 50 or more people to offer health care coverage or pay a penalty. A broader definition of employer could result in some companies finding themselves obligated to provide health care to employees of smaller companies they do business with if the government decides that relationship is sufficiently close.

The report noted that 10 employees in a Virginia McDonald's franchises had filed race discrimination and sexual harassment charges with the Equal Opportunity Employment Commission in January against the corporate parent.

In that case, the commission may be ahead of the board. It said in a brief filed last year in the case Browning-Ferris Industries, another closely watched board case involving the joint-employer standard, that it already uses a broader standard.

"The EEOC urges the board to adopt the same joint-employer standard that the EEOC uses. The EEOC's standard is more flexible, more readily adaptable to evolving workplace relationships and realities, and more consistent with the goals of remedial legislation such as (The Civil Rights Act's ) Title VII," it said.
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