The Obama administration rewarded its union allies last month with a decision that threatens millions of jobs and thousands of businesses, from staffing agencies to cleaning services and auto-repair shops to construction companies. In a case involving Browning-Ferris Industries (BFI), the National Labor Relations Board (NLRB) decided to unilaterally redefine the concept of joint employment—when more than one business is responsible for an employee or group of employees—and made it easier to unionize large corporations. This ruling could have a devastating effect on small businesses, job creation, and the U.S. economy.
On August 27 the NLRB ruled in favor of the Teamsters union and against BFI, which operates a recycling plant in California that employs 60 individuals directly and contracts with Leadpoint, a temporary staffing agency, to fill 240 composter and sorting positions at the plant. In 2013, Teamsters Local 350 petitioned to be certified as the union representative of both BFI and Leadpoint employees, arguing that both BFI and Leadpoint jointly employed the workers. A NLRB Regional Office, relying on precedent, held that Leadpoint was the sole employer of the plant’s composters and sorters, thereby denying the union the right to organize BFI. The Teamsters appealed.
Before last week, two businesses were deemed joint employers only when they both exercised substantial, direct and immediate control over hiring, firing, disciplining, supervising, and directing workers. Now, however, the NLRB has expanded the definition of “joint employer” to include indirect control, unexercised potential control, and a fuzzy notion of “the totality of a putative employer’s influence over employees’ working conditions.”
By defining companies as joint employers, the NLRB threatens the ability of American businesses to grow and create jobs. By giving unions the ability to drag the parent corporation to the bargaining table, the NLRB’s decision will disrupt many kinds of longstanding, beneficial business arrangements—franchise businesses, temp and staffing agencies, and contractors—that employ millions of Americans. It hinders innovation, prohibits flexible work arrangements, and makes it much harder for entrepreneurs to start new businesses.
The real goal of the NLRB’s new joint-employer standard is to make organizing much easier for unions at the expense of workers’ freedom of association. Here’s how it works: The joint-employer ruling now allows unions to organize two employers as one, which means one business would be forced to live by another business’s collective bargaining agreement. For example, under the NLRB’s new standard, if two thirds of workers at Company A vote to unionize, that vote could become binding on employees of Company B, if it’s deemed to be a joint-employer of Company A’s workers. The votes of Company B’s workers don’t even count!
That in turn means that companies like BFI or others that utilize temporary staff or outsource certain functions are likely to bring many jobs back in-house, thereby scaling back the hiring of subcontractors and temporary staff. Yet, the temporary workforce has been a bright spot for U.S. job growth—reaching an all-time high of over 2 percent of the total private-sector workforce in 2014 and employing 3.15 million workers per week.
The NLRB’s joint-employer standard will introduce greater uncertainty into businesses’ labor relations by making the determination of whether an employee is jointly employed highly speculative and specific to every situation. The NLRB’s discretion is virtually limitless under its “totality of a putative employer’s influence” standard, which takes into account a business’ involvement in a wide array of criteria—including sales data, inventory and labor costs, projections of labor needs, employee work schedules, setting wages and wage reviews, the application and screening process, and even productivity.
Ultimately, the NLRB’s decision advances a few special interests while endangering 770,000 franchise businesses and countless firms that use outsourcing, which adds up to 8.5 million employees and temporary staff. American business relies on independent operators or franchisees. This system is threatened by making the larger firm liable for the employment practices of entities it may not be able to control. The result will be fewer new businesses being created.
Under the Obama administration, the NLRB has rewarded labor unions for hefty political contributions to Democratic politicians by making it easier to bolster sagging membership and collect more union dues to prop up severely underfunded pensions.
Congress can minimize the Obama administration’s regulatory onslaught by withholding funding from the NLRB. Congress, having the sole power of the purse, should use that power to ensure the NLRB fulfills its proper role of protecting and advancing the opportunity of workers, not political paybacks.