August 30, 2015

MSCI Comments On NLRB’s Joint Employer Decision

Last Thursday, the National Labor Relations Board (NLRB) issued a ruling in Browning-Ferris Industries that broadened the definition of joint employer under the National Labor Relations Act. In the 3-2 decision, which was split along partisan lines, the NLRB expanded companies’ liability for federal labor violations to employees to include suits that are brought by employees that are only indirectly under a company’s control (for example, subcontractors, temporary employees or employees at franchises). Previously, companies were only responsible for violations against employees that were under their direct control. 

Specifically, the NLRB explained it found “two or more entities are joint employers of a single workforce if (1) they are both employers within the meaning of the common law; and (2) they share or codetermine those matters governing the essential terms and conditions of employment.” The board also explained, “In evaluating whether an employer possesses sufficient control over employees to qualify as a joint employer, the Board will – among other factors – consider whether an employer has exercised control over terms and conditions of employment indirectly through an intermediary, or whether it has reserved the authority to do so.” 

The ruling will not only expand employer liability, it will expand individuals’ ability to unionize. As Corporate Counsel explained, “[C]ontract workers will have the green light to join unions at companies they are contracted to work for, and employers previously not worried about unions may find themselves being dragged to the bargaining table because they have a contract with a company that does have unionized workers.” The Christian Science Monitor noted the ruling means labor unions will be able to “negotiate directly with parent companies to win higher wages and better working conditions while Forbes said it “will erode prohibitions on union practices like secondary strikes, boycotts and picketing.” The Wall Street Journal argued, under the ruling, there really is “no limit on the number of parties that could be seated at the bargaining table.” 

MSCI President and CEO M. Bob Weidner reacted to the ruling Friday. He said, “MSCI strongly opposes the National Labor Relations Board’s decision in Browning-Ferris Industries of California. The ruling throws out precedent that had stood for decades and rewrites the definition of ‘employer.’ It could mean our members are liable for federal labor violations by the security, cleaning or other service providers with which it contracts. Browning-Ferris will raise costs for job creators across industries, including the metals industry, but it’s just one more bad decision in a long line of questionable rulings. This decision, along with the ‘ambush election’ rule, will collectively reduce employment for the very workers they were meant to protect.” (To learn more about the rulings to which Weidner refers, check out this report from the Competitive Enterprise Institute.) 

According to Politico, the Occupational Safety and Health Administration (OSHA) had taken steps to apply the principles of Browning-Ferris Industries to its investigations even before the NLRB issued its ruling on Friday. Last Wednesday the Capitol Hill newspaper reported an internal OSHA memorandum revealed OSHA will contemplate joint employer citations against franchisors for violations of the Occupation Safety and Health Act of 1970. Specifically, Politico reported, “OSHA officials in Washington have asked regional officials to take into account, when considering potential violations at franchised businesses, whether the franchisor in question controls the workplace safety practices of the franchisee.” The newspaper said the agency has already subpoenaed at least one fast food franchisee about its relationship with the franchisor. 

Ray Hennessey of Entrepreneur summed up the effects of the Browning-Ferris Industries ruling. He said, “If [a company uses] temporary workers, contractors or operate a franchise, the cost of doing business – and [its] liability – has just risen.” MSCI will support legal efforts to challenge this ruling. Industry groups are also likely to ask Congress to intervene to address NLRB overreach; MSCI will support those efforts as well.