The National Labor Relations Board, the main federal labor law enforcement agency, rolled back an Obama administration-era effort to help unions organize franchisor corporations such as McDonald’s through the so-called joint employer rule, dealing a blow to organized labor.
Joint employer referred to when two businesses were so tightly aligned that one could be said to be responsible for another’s workplace policies. Prior to the Obama administration, this only applied if one business had “direct control” over another. During the Obama years, the much looser “indirect control” standard was adopted. Tuesday’s announcement means the direct-control standard is the norm again.
The seemingly minor rewrite to an obscure legal standard followed a coordinated push by labor unions such as the Service Employees International Union, which were seeking to organize the fast-food industry. Business trade groups mounted an equally fierce pushback to get the Trump administration to restore the pre-Obama standard. The Labor Department readopted the earlier standard last month. The NLRB followed suit Tuesday.
“This final rule gives our joint-employer standard the clarity, stability, and predictability that is essential to any successful labor-management relationship and vital to our national economy,” said NLRB Chairman John Ring. The rule becomes effective April 27.
The rule change had major implications for labor organizing, potentially allowing unions to organize companies such as McDonald’s Corporation all at once, rather than restaurant-by-restaurant. “If two entities are joint employers, both must bargain with the union that represents the jointly employed employees, both are potentially liable for unfair labor practices committed by the other, and both are subject to union picketing or other economic pressure if there is a labor dispute,” the NLRB stated.
The board settled a case last year with McDonald’s which alleged the company had been a joint employer with its franchise restaurants. The 2014 case had been based on allegations by union-allied activist groups and was the Obama administration’s main rationale for changing the underlying policy.
The SEIU was one of the main funders of the effort to organize fast-food companies through the joint employer rule. The Capital Research Center, a conservative nonprofit group, estimated that the union spent as much as $182 million between 2013 and 2018 in an attempt to organize industry.
Robert Cresanti, president of the International Franchise Association, cheered the announcement. “With today’s rulemaking, the Department of Labor’s final rulemaking on joint employer, and the NLRB’s decision in the years-long McDonald’s case, the past three months represent an unparalleled amount of pro-franchise actions from the federal government,” Cresanti said.
