Thursday’s decision by the National Labor Relations Board involving the Teamsters Union and Browning-Ferris Industries reverses decades of standard practice around the concept of joint ownership in business.
The ruling, which involves a staffing agency that provided workers for a California recycling center, is critical for small businesses to understand because it redefines your responsibilities around hiring contract workers. For franchise owners, it potentially recalibrates who actually controls your business. The ruling could also pave the way for more union activity in your business.
The NLRB, in a statement Thursday, says the purpose of the ruling was to refine its standard of joint-employer status to match up better with the needs of today’s workers, where nearly 3 million people are employed on a contract basis through temporary agencies.
“The Board held that its previous joint-employer standard has failed to keep pace with changes in the workplace and economic circumstances,” the statement said.
The decision is likely to be the subject of lawsuits contesting it going forward. Meantime, here are the two big takeaways for small businesses:
1. More union involvement.
If you use contract workers for any aspect of your business, and they organize, you could be deemed a joint employer, and would then be drawn into negotiations with unions.
You’re also likely to have more difficulty terminating contractors, or even altering their schedules, once workers have officially organized, says Charles Cohen, senior counsel at Morgan Lewis and a former NLRB member.
“Employers big and small are going to have to reassess their relationships to attempt not to become entangled in the employment affairs of others,” he says.
2. Less independence for franchisees.
The Browning-Ferris decision builds on a previous memo from July 2014, in which the board said McDonald’s Corp. could be held accountable as a joint-employer for its franchise owners’ activities and any labor disputes they may have.
"The theory seems to be in the franchise context that the franchisor exerts such operational control through computer systems and the like, advising on proper staffing levels and perhaps other employee relations matters, that the franchisor is, in essence, the employer," employment law specialist Michael J. Lotito, a partner at law firm Littler Mendelson in San Francisco, said last summer discussing cases before the NLRB.
The ruling could also force corporate franchisors, like McDonald’s, to the negotiating table if workers choose to unionize. Unions have become quite active trying to organize service workers in campaigns such as Fight for 15.