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NLRB Ruling Redefining 'Employer' Could Have Big Impact If It Stands

A decision by the National Labor Relations Board broadening the definition of "employer" sets the stage for what is expected to be a protracted legal battle between business interests and organized labor that could ultimately lead to a new understanding of what it means to be a worker in America.

Thursday's ruling by the NLRB involving sanitation company Browning-Ferris Industries was fairly narrow, concluding that both the company and a subcontractor are joint employers of workers. But employment law experts say that, if it stands, it could have big implications for large franchisors like McDonald's and other fast-food operators as well as the growing number and type of companies that depend on contract or temporary help, including those in the so-called "sharing economy" like Uber.

"It definitely opens up or broadens the joint employer standard," said Jeffrey Hirsch, a law professor at the University of North Carolina. "The degree to which it does that is too early to tell, but certainly for employers like franchisors and many others, it's a potential new liability."

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Fast food workers and activists demonstrate outside the McDonald's corporate campus on May 21, 2014 in Oak Brook, Illinois.
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Fast food workers and activists demonstrate outside the McDonald's corporate campus on May 21, 2014 in Oak Brook, Illinois.

The National Employment Law Project, a group supportive of labor unions, said that the issue is increasingly important because contract staffing has moved beyond its roots in white-collar clerical work into a broad array of industries, including traditional blue-collar and lower-skill jobs like construction, janitorial and food service.

"Subcontracted and other nonstandard work structures are prevalent in the industries experiencing the greatest job growth during the recovery. … These fast-growing industries are marked by high rates of outsourcing," the group said in an amicus brief it filed in the NLRB case.

The NLRB's decisions also could have ramifications for the sharing economy. Numerous tech companies that say they are only platforms for buyers and sellers of services might find themselves redefined as employers, much as Uber was in California, when the state's Labor Commission ruled in June that a driver who sued the car-sharing startup was technically an employee, not an independent contractor as the company maintained. (Uber has appealed the decision.)

The expanded use of contractors leaves a lot of workers without the traditional benefits afforded to employees, which saves money for companies but can leave workers in a legal gray area.

"Our laws today are geared to protecting the interest of employees … (leaving) out a large swath of people who aren't employees," said Ravin Jesuthasan, a managing director at the consulting firm Towers Watson. "I think both individuals and companies are going to want legislation that recognizes this isn't a binary decision. I think it's more about coming up with hybrid legislation ... that goes beyond simply defining a worker as an employee or not."

Over the past few decades, the nature of work has changed so drastically that the government needs to act, Jesuthasan said.

"The legislation is incredibly antiquated. … I think we're going to see a lot of pressure put on the Department of Labor to respond," he said.

Hirsch, the UNC professor, said he, too, expects the Labor department to weigh in at some point on the need for new rules.

"The Department of Labor has been looking at these types of issues recently," he said. "This wouldn't surprise me if this is an issue they've got simmering in the background" to address.

In the statement announcing its decision, the NLRB acknowledged that American labor law is outdated, saying, "The board held that its previous joint employer standard has failed to keep pace with changes in the workplace and economic circumstances."

Any wide-reaching changes in employment, however, are not likely to come quickly. An appeal in court, which appears likely, could take a year or more, Hirsch said, and if the case were to go all the way to the Supreme Court, a final resolution could be years away.

In the meantime, though, Hirsch said the board's decision is likely to embolden unions to raise more challenges about what a company's responsibilities are to the workers under its umbrella, including those directly employed by franchisees, contractors and subcontractors.

"You're going to see unions pushing this argument on more employers," he said.

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He noted, however, that a broad labor victory is not assured. These types of cases tend to hinge on specific facts of individual company-worker relationships, which could prevent the NLRB ruling and any similar rulings that follow from having as broad an impact as the pro-labor contingent might like, he said. Likewise, different courts could come to different conclusions: While Uber lost a round in California, the company has prevailed in other legal disputes that raised similar arguments.

Even if pro-union forces earn the right to organize contract and franchise workers, though, they still must get a majority of workers to agree to collective bargaining, which could present another hurdle.

"Employees would still have to be organized and have votes to say they want representation," said Gary Burtless, a labor economist at the Brookings Institution, who points to the sharp decline in unionization in the private sector. "Employees are increasingly … (no) voting to be represented by labor unions. That's the fundamental problem."