On Thursday, the body overseeing union-employer disputes released a proposal to abandon a 2015 decision by the prior, Democratic-controlled board that ruled a company could be held liable if it illegally interfered with workers’ rights to organize a union, even if those employees didn’t directly work for the firm.
The board’s 2015 decision, in a case known as Browning-Ferris Industries, held that firms such as fast-food or hotel chains would be required to bargain along with the franchisee with such a union.
The board’s proposed rule aims to limit lead firms’ liabilities by saying they aren’t joint employers of a worker, even if the companies’ exercise indirect control of the worker, such as weighing in on hiring practices, disciplinary procedures or other employment conditions.
The board is proposing that companies must have “substantial, direct and immediate control” over a third party’s workers to be deemed a joint employer. NLRB Chairman John Ring, who was confirmed in April, said earlier this year that he would introduce such a rule by the end of summer. It will be open for 60 days of public comment.
Business groups like the U.S. Chamber of Commerce applauded the move, while others said the standard for holding companies liable for employment practices should evolve as the economy evolves.
The board is “going backwards, when some of us would say the law should be moving forward to keep up with changing employment relations and business models,” such as a growing use of outsourcing arrangements, said Wilma Liebman, an adjunct professor at New York University School of Law and head of the labor board from 2009 to 2011. Ms. Liebman is a Democrat.
Last year, after Republicans took control of the agency, the board attempted to address the joint-employer issue through a 3-2 vote that effectively overturned the 2015 decision. But in February, the board withdrew that decision after the board’s ethics officer determined that William Emanuel, a Republican nominated by President Donald Trump, should have been disqualified from participating in the proceeding because he had a conflict of interest.
Mr. Emanuel’s former law firm, Littler Mendelson P.C., represented a staffing services firm that was party to the 2015 case that was overturned. That presented a challenge to undoing the ruling. Two of the three Republicans on the board are former corporate lawyers at large firms involved in many high-profile labor law cases. Changing the joint-employment standard through rule making removes the need to consider prior cases where conflicts might exist.
Sen. Lamar Alexander (R., Tenn.), chairman of the Senate labor committee, said the proposed rule would make it easier for large firms to sell franchise operations to small businesses.
“The Obama Administration’s expansion of the joint employer standard threatened to destroy the American Dream for owners of a franchise business,” he said.
Sen. Elizabeth Warren, a Democrat on the labor committee, criticized the rule-making approach. “Republicans on the board are now ignoring these rules and barreling towards reaching the same anti-worker outcome another way,” she said.