Labor Relations: NLRB Assault on Franchises Likely to Expand to Other Contractual Relationships; Expedited Election Rules to Be Issued Soon

August 26, 2014

The General Counsel's attack on franchise relationships has once again drawn public attention to the National Labor Relations Board's agenda, as the Board wrestles with a huge backlog created by the U.S. Supreme Court's Noel Canning decision and finalizes rules that will shorten union representation election campaigns to as few as 10 days.

General Counsel Actions Deeming Franchisor/Franchisees "Joint Employers" Highlights Broader Attack  The stunning decision this summer by NLRB General Counsel Richard Griffin to authorize unfair labor practice (ULP) complaints against McDonald's as a "joint employer" of its franchisees' employees is part of a broader effort by the Obama administration to attack the so-called "fissured workplace."  An op-ed in The Washington Post noted that the decision helped "shine a light on a larger problem:"

Today, you are increasingly likely to be an "independent contractor," a "temp," a "franchisee," a "freelancer," a "subcontractor" or some other version of outsourced laborer.  On the question of "who's the boss?" obfuscation has become the name of the game.  So when something goes wrong, it's not clear whom to hold responsible. 

A Wall Street Journal editorial offered a different assessment of the wisdom of Griffin's actions: "Why would entrepreneurs assume a 100% equity stake in a business that they only partially control? Why would a corporation franchise if the legal liabilities and responsibilities are the same as owning?"  Griffin's action is not the final word as far as the NLRB is concerned, as the ULP complaints, absent settlement, will have to be adjudicated by an administrative law judge, whose decision will be reviewed by the five-member NLRB, and ultimately the federal courts.  In another case, the Board asked for amicus briefs on whether to revisit the long-standing rules for determining joint employer status, which will have broad impact on contract workers, and independent contractors.  The Board is expected to go along with Griffin's approach.  Meanwhile, the next agency to take up the cause is likely to be the DOL Wage & Hour Division, which enforces the Fair Labor Standards Act, Family & Medical Leave Act and others.  As an academic, Wage & Hour Director David Weil wrote a treatise on the so-called "fissured workplace," noting that "large corporations have shed their role as direct employers of the people responsible for their products, [resulting in] declining wages, eroding benefits, inadequate health and safety conditions, and ever-widening income inequality."

Board Decisions on Micro-Units Set the Stage for Expedited Election Rules This Fall  When the Board issued its controversial Specialty Healthcare decision in 2011, it set a very high bar for employers to defend against union attempts to balkanize the workplace by carving out subsets—i.e., "micro-units"—where an election majority is more easily obtainable.  Even under Specialty, the determination is very fact-intensive.  This summer, the Board attempted to clarify the application of Specialty in the retail setting, where the issue has been most contentious.  However, its conflicting decisions to allow a separate unit of fragrance and cosmetics sales associates in the Macy's case, while rejecting a unit of women's shoe sales associates in Bergdorf-Goodman, if anything, generated even more confusion.  Concern over micro-units and elections generally will intensify later this year when the Board issues final regulations that will shorten the union representation election period from the typical current period of six-to-eight weeks to as brief as ten days.  Employers are concerned that that provides very little time for employees to hear both sides of the union issue—from their co-workers as well as the employer and the union.  This will become even more difficult where the union has already identified a small subset of the workplace where its message may have greater allure.

Board's Impact on Non-Union Workplaces to Continue to Escalate  At least for the remainder of the Obama administration, the NLRB can be expected to continue to scrutinize employer policies as to whether they have a "chilling effect" on the right of employees to engage in discussions and other "protected concerted activities" aimed at improving their conditions.  The Board has been quick to strike down policies in areas such as social media, workplace investigations, and others even where the employer has not enforced them in an unlawfully restrictive manner.  This has been particularly problematic in non-union settings where there is no apparent interest in having a union.  The next area likely to be impacted is e-mail policies.  This spring, the Board asked for amicus briefs in the Purple Communications case and is likely to strike down employer policies prohibiting or limiting the personal use of workplace email systems.

Labor's Supporters in Congress Seek to Elevate Labor Rights as a New Civil Right  Before Congress left for the August recess, Reps. Keith Ellison (B-MN) and John Lewis (D-GA) introduced legislation amending the National Labor Relations Act to allow private lawsuits to protect union activism along the same lines as those brought under Title VII based on race, gender and other protected classes, while also providing for compensatory and punitive damages.  The Employee Empowerment Act (H.R. 5280) would leave in place existing National Labor Relations Board procedures, which allow an individual to file a "charge" with the NLRB General Counsel alleging employer unfair labor practices.  If the General Counsel believes the charge has merit, he or she acts as the employee's attorney in prosecuting the employer.  The bill would add an additional bite at the apple by enabling individuals to also file a private lawsuit against the employer seeking much greater damages than are currently available under the NLRB's "make whole" remedial scheme.  Although the bill would make no changes to the union representation election process, it would enable unions to threaten an employer with costly lawsuits, including class actions, unless the employer agrees to recognize the union.  Given Republican control of the House, the bill is at most a symbolic action, but it underscores the new tactics that are already being used by the labor movement to go outside the traditional union organizing mechanisms.

Activist Agenda Potentially Slowed by Supreme Court Decision In Noel Canning, the U.S. Supreme Court potentially nullified as many as 900 to 1,000 decisions handed down while the Board was composed of unlawfully appointed "recess" appointments.  The five-Member board is in the process of reconsidering those where the losing party seeks to contest the previous decision.  Meanwhile, Democrat Nancy Schiffer's term expires in December, which would bring the Board down to four members with a 2 to 2 even split between the parties.  President Obama has sought to forestall this by nominating Sharon Block, one of the challenged recess appointments.  Senate Majority Leader Harry Reid (D-NV) is likely to again invoke the "nuclear option" to confirm Block before the Senate adjourns this year.