NLRB: we’re coming after franchisors and subcontractors

In a long-feared ruling, the Obama National Labor Relations Board has ruled that a company that employs subcontractors or engages in franchising can over a wide range of situations be deemed a “joint employer” for purposes of liability for labor law violations and obligation to bargain over wages and working conditions with subcontractors’ or franchisees’ work forces. The decision imperils many of the most successful business models on the American economic scene. I’ve got a write-up at Cato observing that the ruling is likely to wreak havoc with, among many other sector, Silicon Valley and sharing-economy launches and asking “One wonders whether many of the smart New Economy people who bought into the Obama administration’s promises really knew what they were buying.”

More coverage of the NLRB’s Browning-Ferris ruling: Reuters (quotes me on the not-bright prospects for Hill action); Seyfarth Shaw; Tim Devaney, The Hill; “Good week to change name of NLRB to National Labor Resuscitation Board.” [Jonathan Segal] And, from standpoints supportive of the ruling, Al-Jazeera and Prof. Catherine Fisk/On Labor.

P.S.: At the Weekly Standard, Andrew B. Wilson notes that Obama wage/hour czar David Weil doubles as a key ideologist of the kill-outsourcing crowd.


  • Next step, holding manufacturers and importers responsible for the practices of their retail-business customers.

  • In the Great Circle of Life, we’re all connected. We might as well all sue each other and just get it over with.

    I recommend starting with legislative staffers and heads and staffs of regulatory agencies.

  • I think it depends on the circumstances. I currently work for a subcontractor, but the company directly told the subcontracting firm how much to pay us, what hours we were to work, and what qualifications we were to have. So of course, any labor negotiation would have to include the parent company – because the parent company is setting our work conditions and pay, and the subcontractor is simply doing some HR administration for them. And yes, in my case the parent company is involved in the labor negotiations. Companies do legitimately use subcontractors for a variety of reasons, such as for short term projects requiring specialized labor or because an existing firm has a track record of being more efficient at a certain task necessary to your business but not central to it, but there have also been instances where they have used subcontracting as a kind of shell game to avoid having to follow labor laws. The subcontracting firms are often small businesses that can simply “disappear” if they are found to be in violation of labor laws, while the parent company keeps the benefit. This is not the first NLRB ruling on the issue of subcontracting, nor will it be the last. And having some guidance on where a company’s responsibilities begin and end is a good thing.

  • Now, come on. This is not the end of the world.

    The rule seems to be that an entity that sets the requirements for work, in whole or in part, is a joint employer. If an entity hires an individual or a company and simply says: get the job done and I will pay you x dollars, that is a totally different situation.

    Why, exactly, is this a huge problem?

  • I suggest that we start with executive branch of government, then the legislative, then the judicial. After that we shouldn’t have to go any further.

  • […] czar David Weil doubles as a key ideologist of the kill-outsourcing crowd [Weekly Standard, related earlier on NLRB move against franchise and subcontract […]

  • […] eventually strike down the National Labor Relations Board’s awful Browning-Ferris ruling (earlier) extending labor-law liability across many franchising and subcontracting relationships, predicts […]