WASHINGTON - A ruling issued Aug. 27 by the National Labor Relations Board "will make many business leaders’ heads spin," says the National Law Review. The Wall Street Journal's lead editorial on Aug. 29 accused the NLRB of making a ruling that "radically rewrites U.S. labor law" and of "ruining countless August vacations this week" for its readers in the business community. The National Federation of Independent Business warned the ruling could “blow up” long-standing business models.
The nation's business community is up in arms about a ruling that resulted from a 2013 case brought by Teamsters Local 350 in Daly City, Calif., against Browning-Ferris, a waste management company that is owned by Republic Services - the second-largest waste services company in the U.S. The union maintained that Republic had control over wage and working conditions for its workers employed through Leadpoint Services, a staffing agency, and counted as a joint employer with that agency. The NLRB agreed.
The landmark ruling could get overturned in the courts, eventually. But the Journal reports that Browning-Ferris can only appeal the NLRB's decision only after and if the Teamsters win a union representation election, which could take two years to work through the courts. Until then, the NLRB's position stands. And that means the NLRB ruling, among other things, puts a crimp on the ability of businesses to misclassify workers as "independent contractors," who may be employees of a lead or parent company in every way except that they get a tax form 1099 instead of a W-2.
“This decision will make a tremendous difference for workers’ rights on the job. Employers will no longer be able to shift responsibility for their workers and hide behind loopholes to prevent workers from organizing or engaging in collective bargaining,” said Teamsters General President James Hoffa. “This is a victory for workers across America.”
Organized labor has charged for decades that many companies hide behind the use of subcontractors, or designate workers as "independent contractors," in order to keep workers off their pay and benefit rolls, to keep unions from gaining a foothold and to shed liability for workplace injuries.
The Washington Post called it a "landmark case" that could open access to collective bargaining for more workers. Timothy Glynn, a professor at Seton Hall University Law School told the Post that corporations have been “trying to have it both ways - have the benefits of the control, and not the disadvantages."
An analysis by the AFL-CIO said this case deals specifically with a staffing agency that supplied workers to Browning-Ferris Industries. "But the rule laid out in the decision," the labor organization said, "could apply to a franchise situation, depending on the facts of the case and how much the franchiser has authority to control key aspects of the workplace." The case likely has applications for restaurant franchisers like McDonalds, which has maintained that the parent corporation doesn't have liability for what happens in their thousands of franchised restaurants. Now, a parent company could be pulled into collective bargaining negotiations with a subcontractors' or franchisees' employees and held liable for any labor violations committed against them.
The board said it is seeking to hold both companies responsible as joint employers, because they “share or co-determine those matters governing the essential terms and conditions of employment."
This was one in a long string of recent pro-worker rulings by the NLRB, which has a 3-2 Democratic majority of President Obama's appointees.
The case also has potential applications in the construction industry, where the use of so-called 1099 employees is rampant. Nonunion firms are notorious for employing workers as independent contractors - and thus better able to underbid union contractors who pay their workers prevailing wages and benefits.
The anti-union Associated Builders and Contractors said the ruling "uproots 30 years of labor standards." Said ABC Vice President of Government Affairs Geoff Burr: “This ruling threatens both responsible contractors who have established sound workplace protocols and subcontractors by deeming them joint employers of the subcontractors’ employees. Contractors may find themselves vulnerable to increased liability making them less likely to hire subcontractors, most of whom are small businesses, to work on projects.”
The Teamsters Union said it has aggressively fought against employers shifting responsibility of their workforce, including through worker misclassification at companies like FedEx, where many drivers are considered independent contractors.
“Today’s decision is another step to show that companies can no longer claim they are not employers when problems arise. This is important in industries like the solid waste and recycling industries, where workers can face dangerous working conditions and need proper training and standards to have safe working environments,” said Ron Herrera, Director of the Teamsters Solid Waste and Recycling Division. “Instead of pointing fingers if a worker gets hurt, companies will now be accountable. It’s the decent and reasonable expectation that workers should have at work.”
Victor Narro, project director at the UCLA Labor Center, said to the LA Times that the NLRB ruling is very good news for the labor movement. He said it "creates an incentive for workers to realize they have power. It creates an effective message for unions to relate to the workforce: that you no longer have to get caught up in just franchisees, there is now a way to bring the flagship corporation to the table to negotiate. The labor movement has been sparked by this decision, from what I've seen."