HR Policy Warns NLRB Against Expanding Definition of "Employer" to Include Franchisors, Contractors

June 26, 2014

This week, HR Policy joined several other business groups in urging the National Labor Relations Board to retain well-established law in determining whether two separate businesses are deemed "joint employers" of a group of employees.  The Board requested briefs in the Browning-Ferris Industries case, and its decision could have an impact on franchisor-franchisee relationships as well as companies contracting with a third-party provider or workers.  Organized labor has complained about the long-standing rules in this area which examine whether both companies "share the ability to control or co-determine essential terms and conditions of employment."  Labor contends that the rule should instead look at whether the client company has "indirect control" over those conditions and is the employer, at least in part, as a matter of "economic reality."  Our brief, filed by Zach Fasman of Proskauer Rose, states:

By tying joint employer status to direct and immediate control over fundamental aspects of the employment relationship—hiring, firing, discipline, supervision and direction—the [current] standard ensures that the joint employer is actually involved in matters material to the scope of the Act, and is not merely engaged in a market relationship that may have an indirect impact upon employees… The consequence to a business of [changing the standard], including the time and cost of bargaining with possibly hundreds or thousands of business partners throughout the country, would be enormous… Rather than accept such liabilities with no control over the workplace, or engage in endless bargaining across the country, many companies undoubtedly will opt to cancel subcontracts or franchise arrangements, or subcontract overseas, thus displacing small businesses and the millions of jobs that small businesses create.  The impact upon the economy would be enormous.