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Upcoming ‘Joint Employer’ Regulation Could Boost Unionization, Despite Opposition

by Gabriel Martinez
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Joint Employer Rule

Next month, a newly introduced federal regulation is set to potentially simplify the process of union formation for millions of employees at large corporations, including those like McDonald’s. This development, however, is encountering resistance from several business groups and congressional representatives.

The regulation, unveiled recently by the National Labor Relations Board (NLRB), proposes updated criteria for classifying two businesses as “joint employers” under the National Labor Relations Act. This might appear technical, but in essence, it could expand the scope of companies required to engage in labor discussions with their franchisees or contract workers. For instance, Burger King could be obligated to negotiate with employees at its franchise-owned U.S. outlets, or Amazon might need to engage in talks with delivery personnel employed by third-party contractors.

Cathy Creighton, director at Cornell University’s Buffalo Co-Lab, explains that the rule aims to address the modern employment landscape where many businesses outsource work yet retain significant control and financial influence.

The NLRB argues that this rule rectifies the shortcomings of a 2020 regulation which allowed joint employers to evade negotiating responsibilities. Established in 1935, the National Labor Relations Act upholds the right of U.S. workers to create or join unions.

However, critics, including business associations like the American Hotel and Lodging Association which has filed a lawsuit, view this as an excessive move by the pro-labor Biden administration that could disadvantage independent business operators. McDonald’s CEO Chris Kempczinski, emphasizing the importance of the franchise model in creating opportunities for minorities and women, advocates for support rather than scrutiny of this system.

Senators Joe Manchin (D-WV) and Bill Cassidy (R-LA) have proposed a resolution under the Congressional Review Act to repeal this rule, which requires approval from both Congressional houses and the President’s signature. President Biden, a self-proclaimed ally of unions, has yet to comment on this specific rule, set to be effective from December 26.

Richard Eiker, a long-time fast-food worker and union advocate, criticizes companies like McDonald’s for dodging responsibilities towards workers at franchised locations. He highlights the struggles of inadequate healthcare and financial constraints faced by workers like himself.

The concept of this joint employer rule traces back to the Obama era. In 2015, the NLRB’s decision in a case involving Browning-Ferris Industries was upheld by a federal court, defining them as a joint employer of contract workers due to their control over working conditions. However, the Trump administration’s NLRB narrowed this definition in 2020, requiring “substantial direct and immediate control” over employment conditions for a joint employer status.

The current rule, passed by a Democrat-led board, echoes the 2015 Browning-Ferris decision, suggesting that a company may be a joint employer if it has authority, direct or indirect, over any employment condition, such as wages, benefits, or work rules.

Although this rule pertains only to labor relations, with the Department of Labor having separate standards for issues like minimum wage compliance, its impact could be substantial. Over 8 million individuals are employed by local franchisees in the U.S., with millions more working for subcontractors or temp agencies.

John Motta, owner of multiple Dunkin’ outlets and leader of the Coalition of Franchisee Associations, expresses concerns about the potential loss of operational independence for franchisees. The rule could lead major companies to reconsider franchising to avoid liabilities for labor violations by franchisees.

Labor attorney Michael Kaufman points out potential complexities, like a business facing unfair labor charges if it instructs a contractor to dismiss a temporary worker for misconduct.

Despite these concerns, labor unions argue for the necessity of the rule to guarantee effective negotiation of working conditions and wages, insisting on the involvement of all influential parties in such discussions. Organizations like the AFL-CIO, Teamsters, and SEIU have communicated to Congress the vital importance of this rule for upholding workers’ collective bargaining rights.

Frequently Asked Questions (FAQs) about joint employer rule

What is the new federal rule regarding ‘joint employers’?

The new rule by the National Labor Relations Board redefines the criteria for considering two businesses as “joint employers” under the National Labor Relations Act. This change could require larger companies to engage in labor negotiations with workers of their franchisees or independent contractors, potentially simplifying union formation for millions of workers.

How might the new rule impact companies like McDonald’s and Amazon?

The rule could require companies like McDonald’s and Amazon to negotiate directly with workers at their franchise-owned outlets or with those employed by independent contractors, expanding the scope of their labor negotiations and responsibilities.

What is the opposition to the new joint employer rule?

Critics, including some business associations and members of Congress, view the rule as an overreach by the Biden administration and a threat to the independence of franchise business models. Lawsuits have been filed to block the rule, and a Congressional Review Act resolution has been introduced to overturn it.

Who supports the new joint employer rule?

Labor unions and workers’ rights advocates support the rule, arguing that it is necessary for effective collective bargaining and to ensure that workers can negotiate fair wages and working conditions with the actual entities controlling these aspects of their employment.

What was the previous stance on the joint employer rule?

Under the Trump administration, the definition of a joint employer was narrowed, requiring companies to have “substantial direct and immediate control” over employment conditions to be considered joint employers. The new rule reverts to a broader interpretation similar to the one established during the Obama administration.

More about joint employer rule

  • National Labor Relations Board
  • Congressional Review Act
  • American Hotel and Lodging Association lawsuit
  • AFL-CIO, Teamsters, and SEIU letter to Congress
  • Browning-Ferris Industries case
  • Department of Labor joint employment standards
  • McDonald’s CEO Chris Kempczinski’s statement
  • Senators Joe Manchin and Bill Cassidy’s resolution
  • Coalition of Franchisee Associations
  • President Biden’s pro-union stance

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