By Julie Lucarelli

On Friday August 28, 2015, the National Labor Relations Board (NLRB), made a momentous decision.

In the case of Browning- Ferris Industries of California, Inc., the board voted to change the definition of "joint employer." The board concluded in a 3-2 decision, split along party lines, that a joint employer is now “...two or more entities…of a single workforce if (1) they are both employers within the meaning of the common law; and (2) they share or codetermine those matters governing the essential terms and conditions of employment.” 

For the past 30 years, “joint employer” had been defined as a company that had to “...not only possess the authority to control employees’ terms and conditions of employment, but also exercise that authority." The new definition is widely supported by labor organizations which have been pushing to be recognized by franchise owners and make it easier for subcontracting employees to unionize.

The dissenting members of the board, Philip A. Miscimarra and Harry I Johnson, emphasized the broad and destructive ramifications of the decision, writing:

“The new joint-employer test fundamentally alters the law applicable to user-supplier, lessor-lessee, parent-subsidiary, contractor-subcontractor, franchisor-franchisee, predecessor-successor, creditor-debtor, and contractor-consumer business relationships under the Act.”  

And indeed, restaurant trade associations are dreading the impact of this new definition, which makes their members responsible for the terms and conditions of their franchisees. The International Franchise Association (IFA), for example, strongly opposes the ruling, responding for its members in a press release:

“If franchisors are joint employers with their franchisees, these

thousands of small business owners would lose control of the operations and equity they worked so hard to build. The jobs of millions of workers would be placed in jeopardy and the value of the businesses that employ them would be deflated.”

This ruling has large ramifications extending not only to franchises, but also to small business and many industries that utilize contracts or consultants, such as construction.  The National Retail Federation (NRF) also opposes the recent redefinition of the long-standing understanding of “joint employer.”

In the past, companies had hired contractors and staffing firms without exercising any direct control over these workers. For example in the Browning- Ferris Industries of California, Inc. case, Browning-Ferris Industries hired a separate company, Leadpoint, to supply workers who sorted through cleaning and recycling onsite. Leadpoint had its own managers and supervisors, separate from the employees of Browning Ferris.  The NLRB found that Browning Ferris Industries is a joint employer with Leadpoint, because it retained the right to be involved with matters of employment. The new definition argues that a company does not have to be directly involved with its temporary employees or subcontractor, but merely retain the right.

This ruling will kill the franchise industry and thereby deal a severe blow to the national economy.  It will make it especially hard for subcontractors because their employment is an added responsibility on their temporary employer.

The result will be thousands of American families and workers will lose their jobs.

At the expense of helping organized labor, the NLRB has crippled the franchise system, and an independent business model that has created millions of jobs.  

Unlike the NLRB.