Upcoming ‘Joint Employer’ Rule May Facilitate Unionization Amid Challenges

In the coming month, a new federal rule is poised to potentially transform the landscape of labor relations in the United States, with far-reaching implications for both workers and businesses, particularly large corporations like McDonald’s. However, it’s encountering formidable opposition from businesses and certain members of Congress.

Recently announced by the National Labor Relations Board (NLRB), this rule sets forth fresh criteria for determining when two entities should be classified as “joint employers” under the venerable National Labor Relations Act. While the terminology may seem technical, its consequences are profound, as it could extend the list of companies obligated to engage in labor negotiations alongside their franchisees or independent contractors. For instance, it might compel Burger King to engage in negotiations with its workers, even though most of its U.S. outlets are operated by franchisees. Similarly, Amazon may find itself in negotiations with delivery drivers classified as independent contractors.

Cathy Creighton, the director of the Buffalo Co-Lab at Cornell University’s School of Industrial and Labor Relations, succinctly captures the essence of the rule change: “It’s trying to take in the realities of today’s workforce when many employers subcontract out work and say, ‘Oh, we’re not the employer.’ It’s the employer who is really calling the shots and has the money.”

The NLRB contends that this new rule rectifies a 2020 rule that had made it unduly easy for joint employers to evade their responsibility to negotiate with workers. The National Labor Relations Act, an 88-year-old cornerstone of labor rights, safeguards the right of U.S. workers to form or join unions.

Nevertheless, critics assert that this new rule represents an encroachment by the labor-friendly Biden administration, one that undermines independent business proprietors. Legal actions to halt its implementation have already been initiated by certain entities, including the American Hotel and Lodging Association.

McDonald’s President and CEO, Chris Kempczinski, passionately defended the franchise business model during a recent investor conference call, emphasizing its role in wealth creation, particularly for underrepresented minorities and women. He urged support for the model, rather than its attack.

Two U.S. Senators, Joe Manchin, a West Virginia Democrat, and Bill Cassidy, a Louisiana Republican, have introduced a Congressional Review Act resolution aimed at overturning the rule. The fate of this resolution hinges on approval from both houses of Congress and the President’s signature. While President Biden’s stance on the new joint employer rule remains undisclosed, he has positioned himself as the most pro-union president in American history. The rule is slated to take effect on December 26.

Richard Eiker, a seasoned fast-food worker, sees McDonald’s as exerting substantial control over its franchised outlets while evading its responsibilities towards workers. Eiker, a prominent figure in the pro-union group Stand Up KC, believes that unionization could enhance his compensation, benefits, and working conditions, addressing concerns such as affordable healthcare and paid time off for medical appointments.

The origins of this new joint employer rule can be traced back to the Obama administration, which, in 2015, ruled that Browning-Ferris Industries, a waste management company, should be designated the joint employer of contract workers due to its authority over their working conditions. This ruling was upheld by a federal court in 2018. However, during the subsequent Trump administration, the Republican-controlled labor board narrowed the definition of a joint employer, stipulating that companies could only be considered joint employers if they possessed “substantial direct and immediate control” over employment conditions.

The latest rule, passed under the aegis of a board now under Democratic control, closely mirrors the 2015 Browning-Ferris ruling. It posits that companies may be deemed joint employers if they wield authority, whether direct or indirect, over at least one employment condition, including wages, benefits, working hours, scheduling, duty assignments, work regulations, and hiring.

It’s crucial to note that this rule exclusively pertains to labor relations, as the Department of Labor maintains its separate standards for joint employment concerning minimum wage requirements.

Nonetheless, the potential impact of this new rule looms large. Local franchise owners employ over 8 million individuals in the U.S., according to the International Franchise Association, and countless others are employed by subcontractors or temporary agencies.

John Motta, who owns 32 Dunkin’ locations in New Hampshire and Virginia, underscores that franchisees must adhere to specific brand standards and utilize Dunkin’ branding and uniforms. However, beyond these elements, franchisees aspire to operate their businesses autonomously. Motta, who heads the Coalition of Franchisee Associations, representing approximately 46,000 franchisees, expresses concern that the rule may prompt companies like Dunkin’ to sever ties with franchisees and assume direct control of outlets to avoid liability for potential labor violations.

Michael Kaufman, an attorney specializing in labor disputes, highlights potential complications arising from the rule. For instance, if a business hires temporary workers through a contractor but later requests the contractor to terminate a temporary worker for harassment, the new rule might empower the temporary worker to file unfair labor charges against the business.

Labor unions counter these concerns by asserting that the NLRB will evaluate such situations on a case-by-case basis, emphasizing the necessity of the rule to ensure that all workers can engage in negotiations concerning wages and working conditions. In a letter sent to members of Congress, the AFL-CIO, the Teamsters, and the Service Employees International Union underscored the importance of having entities with the power to alter employment terms and conditions at the bargaining table for the realization of workers’ collective bargaining rights.

Frequently Asked Questions (FAQs) about Joint Employer Rule

More about Joint Employer Rule

• National Labor Relations Board (NLRB)
• National Labor Relations Act
• American Hotel and Lodging Association
• Congressional Review Act
• McDonald’s President and CEO Statement
• Coalition of Franchisee Associations
• AFL-CIO
• Teamsters
• Service Employees International Union