House Republicans moved Wednesday to rein in the National Labor Relations Board, the main federal labor law enforcement agency, by advancing legislation that would undermine the board’s complaint against McDonald’s Corp.
The lawmakers argue that the board overstepped its authority in the case, which could have a major impact on all companies that franchise out their brand.
The House Education and the Workforce Committee voted 21-15 to pass the Protecting Local Business Opportunity Act. The legislation would clarify that a business can be held liable for violations of workers’ rights at another company, including its franchisees, only if it has “actual, direct and immediate” control over the second company’s workforce. Effectively, it would free most franchisers from liability caused by their franchisees as well as limit liability when a company subcontracts its operations.
“The National Labor Relations Board has played a leading role in advancing the president’s flawed, top-down approach to the economy, and its effort to redefine what it means to be an employer is just the latest example,” said committee Chairman John Kline, R-Minn. “It’s time to get Washington out of the way and let small businesses do what they do best: creating jobs and opportunity for workers and their families. This commonsense proposal is an important part of that effort. The legislation will stop a handful of government bureaucrats from upending countless small businesses and help working families and job creators succeed.”
Democrats slammed the legislation, saying the committee should not be interfering with the board’s efforts.
“This committee ought to be focused on policies that would help working people make a better life for themselves and their families,” said Rep. Bobby Scott of Virginia, the committee’s top Democrat.
The labor board is a quasi-independent agency whose five members are nominated by the president and confirmed by the Senate. Under President Obama, the board has moved to vastly expand its authority, reinterpreting rules to give it more authority to charge companies with violations.
Last year, the board filed an unprecedented complaint against McDonald’s Corp., charging that under its definition of a “joint employer” — a business that is legally responsible for labor law violations made against another business’ employees — it was liable for labor rights violations made by its franchisees. An estimated 90 percent of McDonald’s restaurants are privately owned businesses that essentially rent out the company name and brand. The complaint reversed decades of NLRB precedent that said franchisers and franchisees were not only not joint employers but that the franchiser had a special right to intervene in the activities of a franchisee to protect the company brand. The case is continuing.
In a related case called Browning-Ferris, the NLRB ruled in August that a contractor could be a joint employer with its subcontractors.
The cases prompted an outcry from business groups, which have lobbied Congress to stop the board. Business groups argue the expansion of liability will force corporations to get out of franchising altogether or to assert more control over franchises to avoid liability. That, critics argue, would undermine the entire franchise business model: Companies either wouldn’t do it or entrepreneurs would lose the main reason they become franchise owners in the first place — the ability to control their own business.
Republican lawmakers have also charged that the Labor Department was working with the labor board to expand the joint employer standard to its agencies such as the Occupational Health and Safety Administration.
In a letter to Labor Secretary Tom Perez earlier this month, Kline demanded that the department turn over “a list of all meetings between the department and stakeholders, including but not limited to the Service Employees International Union, and all associated documents and communications.” SEIU has been a major advocate of expanding the joint employer standard.
NLRB General Counsel Richard Griffin said at an American Bar Association forum earlier this month that the “sole reason” the NLRB was pursuing the case against McDonald’s was because of complaints filed against the fast food giant by Fight for $15, a nonprofit activist group. SEIU founded and runs the nonprofit. Its organizing director, Kendall Fells, is an SEIU employee. The union spent $23 million on the campaign in 2014, Labor Department filings show.
