WASHINGTON — A federal labor board voted Thursday to redefine the employee-employer relationship, granting new bargaining powers to workers in an economy increasingly reliant on subcontractors, franchisees and temporary staffing agencies.

The decision by the National Labor Relations Board could upend the traditional arms-length relationship that has prevailed between corporate titans such as McDonald’s and its neighborhood franchises. And it comes as concerns are growing about a generation of new Internet-fueled business such as Uber and Lyft that depend heavily on independent contractors that often do not have the benefits and protections of full-time employees.

In a case that drew intense lobbying by both business and union groups, Democratic appointees on the panel split 3-2 with Republicans to adopt a more expansive definition of what it means to be an “joint employer.” The decision makes it more difficult for companies to avoid responsibility for the treatment of employees by outsourcing work to others.

In doing so, the panel sided with labor advocates and academics who have described an increasingly fissured economy, in which whole industries have been built on business models that offer workers few of the protections of a traditional employer relationship.

“With more than 2.87 million of the nation’s workers employed through temporary agencies in August 2014, the board held that its previous joint employer standard has failed to keep pace with changes in the workplace and economic circumstances,” the board said.

The board’s action is just the latest to tackle the trend. The Department of Labor has cracked down on employers who misclassify workers as independent contractors, and the Occupational Safety and Health Administration has directed inspectors to consider whether principal employers might be at fault for the safety violations of their subcontractors. Courts, meanwhile, have been scrutinizing companies such as FedEx and Uber for their use of contractors.


Employers are pushing back. Businesses that might be subject to the new joint employer definition have warned that it could undermine established business practices that have kept the U.S. economy competitive by holding down labor costs.

As a result of the decision, some businesses may try to legally distance themselves from their partners to avoid joint employer status, but others may find they need to exert more control.

Corporations are “trying to have it both ways – have the benefits of the control, and not the disadvantages,” said Timothy Glynn, a professor at Seton Hall University Law. “Where I think it would be very difficult to give up control is circumstances where there’s some exacting need for quality, timeliness, or consistency in the product.”

While the case did not address franchising directly, the new standard will apply in a major series of cases involving McDonald’s scheduled for arguments before the NLRB in the fall.

The International Franchise Association has been lobbying against a change in definition for more than a year, arranging public hearings, airing ads and rallying franchisees to make politicians aware of the decision’s potential implications.

“The Board’s tortured analysis will undoubtedly be met with skepticism and will be rejected by local franchise owners, legislators and, ultimately, the courts,” IFA president Steve Caldeira said. “IFA and its allies are asking Congress to intervene to halt these out-of-control, unelected Washington bureaucrats to preserve the established joint employer standard.”


The NLRB’s ruling came in a case concerning a recycling company called Browning-Ferris Industries of Milpitas, Calif., which used a temporary staffing agency called Leadpoint to provide workers. A Teamsters local tried to organize the employees, but it wanted Browning-Ferris to qualify as a “joint employer,” figuring that bargaining would be ineffective unless it also included the larger company whose demands affect the working environment.

A regional NLRB official disagreed, and the Teamsters appealed. This time, the NLRB’s general counsel sided with the union, recommending in an amicus brief that the board ignore a standard in place since the 1980s and apply a broader definition of what it means to be a joint employer.

The board’s Democratic majority agreed and struck down earlier cases that had articulated the previous standard, saying that the growth of the contingent workforce has rendered the definition out of step. In the process, the board reversed the regional director’s decision, deciding that Browning-Ferris exercised sufficient control over hiring, firing, discipline, supervision and work hours to qualify as a joint employer under the new standard. It ordered that ballots impounded after the Teamsters’ election in April 2014 be counted, which – if the union wins – would allow it to bargain directly with the recycling company as well as the staffing agency that hired the workers.

“Today’s decision is another step to show that companies can no longer claim they are not employers when problems arise,” 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.”

The issue has created sharp disagreements within the labor board: The two Republican appointees authored a blistering dissent, arguing that the new standard goes beyond the body’s authority and could have unintended consequences.

“Under the majority’s test, the homeowner hiring a plumbing company for bathroom renovations could well have all of that indirect control over a company employee!” the dissent read. “We suppose that our colleagues do not intend that every business relationship necessarily entails joint employer status, but the facts relied upon here demonstrate the expansive, near-limitless nature of the majority’s new standard.”

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