Obama NLRB Targets Employees of Contract Companies and Franchises
In the latest of a series of bureaucratic reinterpretations of federal labor law that are clearly intended to help union dons secure monopoly control over as many employees as possible, the three radical Big Labor proponents who currently control a majority of the seats on President Barack Obama’s National Labor Relations Board are targeting millions of Americans who work for contract companies and franchises.
On August 27, in deciding a case brought by Teamster union bosses against waste hauler Browning-Ferris Industries (BFI), the Obama NLRB declared that, from now on, companies that employ subcontractors and temporary staffing agencies and franchisors may frequently be regarded as “joint employers” of subcontractor, staff agency, and franchise employees.
As legal commentator Walter Olson has explained, under the NLRB’s extraordinary new policy, remote companies may be regarded as “joint employers” if they have “the power, even the potential power, to significantly influence working conditions or wages at the subcontractor or franchisee . . . .” Previously, remote companies were treated as “joint employers” under federal law only if their actions had a “direct and immediate impact” on workers’ terms and conditions.
Many businesses contract with other companies to clean their buildings, provide security, etc., so that they can focus on their core activities. Franchisors often furnish small business owners with uniforms and store designs and set quality standards and operating hours. Under decades of NLRB and court precedents, they have never been regarded as the employers of workers at independently-owned stores.
Union bosses have long desired to overturn all these precedents, because they know from experience that small companies are far more likely to stand up to Big Labor pressure and public vilification and refuse to sell out their employees who wish to remain union-free than are large corporations.
In order to avoid negative publicity generated by union officials and their allies, large corporations often agree to so-called “card check” and “neutrality” deals that actually help Big Labor gain monopoly-bargaining power over their employees. By comparison, independent franchise owners and operators, as well as small subcontractors, tend to be much more difficult to strong-arm.
But now a 3-2 NLRB majority has made it far easier for Big Labor to corral employees into unions by finding that remote companies can be held liable when franchises and contract companies resist unionization.
As Iain Murray of the Competitive Enterprise Institute emphasized in his blog post about the BFI case, NLRB Chairman Mark Pearce and the two other board members who joined in his opinion, Kent Hirozawa and Lauren McFerran, were “explicit” in acknowledging that their primary aim in rewriting federal labor law by bureaucratic fiat is “to make [monopolistic] collective bargaining easier for trade unions.” (See the link below to read Murray’s entire post.)
If companies like Burger King, Jiffy Lube and the Hair Cuttery respond to the BFI decision by replacing their local franchises with corporate-owned stores and doing their own hiring, union organizers almost surely will benefit from being able to acquire monopoly-bargaining power over thousands and thousands of employees in one fell swoop, instead of having to take over small franchise workforces one by one.
But there is no magic formula through which fast-food stores and other low-cost retail businesses can promptly and sharply raise the pay and benefits of their employees without cutting jobs and/or hours and while continuing to be able to offer their customers a competitive price for their services and turn a profit.
Therefore, employees of former franchise businesses who find themselves unionized as a consequence of the Obama NLRB’s intervention are not likely to see significant compensation improvements coming their way. But, if they are employed in one of the 25 non-Right to Work states, they will almost certainly be forced to pay union dues or fees to keep their jobs.