The National Labor Relations Board has spoken, declaring in a ruling that it is now easier for unions to negotiate on behalf of workers at companies that rely on contractors and franchisees.
The ruling passed on a 3-to-2 vote along partisan lines, according to The New York Times. Now, companies hiring contractors to staff facilities can be considered a joint employer of the workers at the facility, even if it is not actively supervising them. In addition, a union representing those workers would be legally entitled to bargain with the parent company as well as the contractor under federal labor law.
"The decision today could be one of the more significant by the NLRB in the last 35 years," Marshall B. Babson, a lawyer who helped write a brief opposing the rule for the U.S. Chamber of Commerce, told The New York Times. “Depending on how the board applies its new 'indirect test,' it will likely ensnare an ever-widening circle of employers and bargaining relationships."
The issue grew to prominence last year when a complaint was raised at the NLRB against the McDonald's Corp. regarding labor practices. Union-affiliated groups claimed the corporation was a "joint employer" with its local franchises, even though an estimated 80 percent of McDonald's franchises are privately owned. The complaint threatened to expand legal liability for franchisor corporations, casting responsibility over them for employment matters at their franchises rather than the franchise owner. Beyond this, client employers could be liable for operational inconsistencies that may pop up at franchise properties.
Currently, organizing labor unions must take place one franchise at a time. Labor groups want to ease that process by gaining the right to target the corporate parent.
It would be incorrect to say that those in favor of yesterday's franchise model bit back after the ruling -- they were expecting the worst and lobbying Congress to roll back the decision even before it was made.
Jagruti Panwala, director of the eastern division of the Asian American Hotel Owners Association, told the Washington Examiner that she is "certainly optimistic" that enough lawmakers could be persuaded to make a difference in the ruling. Panwala said it is just a matter of getting lawmakers' attention on the matter, claiming many do not understand the impact of the NLRB rule.
"That's understandable," Panwala told the Washington Examiner. "They've got a lot on their plate."
Katherine Lugar, president and CEO of the American Hotel & Lodging Association, also released a statement opposing the NLRB's decision: "With the 92 percent of lodging properties in the United States owned by franchisees and small businesses, we are very concerned that these changes to the joint-employer standard will have a profound negative impact on economic investment and job growth across our industry.
The NLRB’s decision to expand the definition of joint employer could severely limit opportunities by diminishing the autonomy of millions of small business owners and dissuading potential entrepreneurs from wanting to start a new business," Lugar said in the statement.