“The U.S. House of Representatives passed a bill by a vote of 242-181 on Nov. 7 that would require a business to exercise direct control of another entity to be considered a joint employer. If also passed by the Senate and signed into law by the president, the Save Local Business Act would legislatively overturn the National Labor Relations Board’s (NLRB’s) 2015 Browning-Ferris Industries decision, which ruled that entities may be joint employers even if one exercises only indirect or potential control over the other.” [Allen Smith, SHRM] Under Browning-Ferris, “franchisors and companies that employ subcontractors and temporary staffing agencies may frequently be regarded as ‘joint employers’ of franchise and subcontractor employees” and held legally responsible for their treatment [National Right To Work, quotes me] Business, horrified by the rule, has made its overthrow a major priority [Connor Wolf/Inside Sources, Sean Higgins/Washington Examiner and more] Earlier here, here, etc.
House members introduce “Save Local Business Act (H.R. 3441), which would restore the traditional joint employer standard that the NLRB upended and modifies the definition of joint employer under the Fair Labor Standards Act to be consistent with the definition under the National Labor Relations Act.” [Trey Kovacs, CEI, Connor Wolf/Inside Sources Ben Gitis, American Action Forum, earlier on Browning-Ferris and joint employer standard]
In this Cato podcast (7:01), I talk with Caleb Brown about the National Labor Relations Board’s groundbreaking attempt last week to tag McDonald’s with liability for labor violations found at its independently owned local operators. (Reportage: Steven Greenhouse, NYT; Jon Hyman; Diana Furchtgott-Roth/RCP) It’s a drastic departure from current law that would carry implications for outsourcing more generally: a food company that contracts with independent farmers to grow a particular crop, for example, might wind up being liable for the farmers’ treatment of farm workers, a company that outsources its cafeteria, vehicle maintenance, or janitorial services to outside vendors might become legally responsible for ensuring the labor-law compliance of those contractors, and so forth.
The McDonald’s case is the first of what is expected to be multiple cases filed by the NLRB’s general counsel (akin to a prosecutor), and the full Board has not ruled on the resulting complaints, although given the union-friendly role of the Obama NLRB that is likely to be little more than a formality. The initiative will inevitably land in the courts, which have not always been friendly toward Obama regulatory adventurism, and perhaps eventually the Supreme Court.
One consequence, successful or otherwise, if this ploy works: by treating legally distinct entities that contract with each other as if they were parts of a single vertically integrated enterprise, progressive labor law thinkers will create an incentive for giantism to become more real, by giving fast-food franchisers, for example, legal reason to move toward company-owned rather than independently-owned store arrangements. Not for the first time, the law would mow down the ranks of mid-sized businesses in favor of large or nothing. Commentary from others: Megan McArdle; Stephen Bainbridge; Catherine Fisk, On Labor (supporting the idea); Steve Caldeira, The Hill; Alex Bolt. And a relevant House hearing.
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.
The National Labor Relations Board has been so hyperactive lately reshaping the law for the benefit of labor unions that it gets a roundup all to itself:
- NLRB announces new right to use employer’s email system for union organizing [Daniel Schwartz]
- Per 2-1 vote, NLRB agrees with ALJ that restaurant can’t fire workers over false posters claiming its food is unsafe [Patrick DePoy and Christopher Johlie, JD Supra; earlier on case, and IWW campaign against MikLin/Jimmy John’s]
- Other recent NLRB insubordination rulings expand frontiers of right to flip off, cuss out one’s boss [Loren Lee Forrest Jr. and Frederick D. Braid, Holland & Knight, WSJ on Hooters case, earlier]
- “Unions win again at NLRB with ‘ambush elections’ rule” [Kent Hoover/Business Journals, Eric Stuart and C. Thomas Davis, Ogletree Deakins, Hirsch/Workplace Prof, earlier]
- “Expanding Joint Employer Status: What Does it Mean for Workers and Job Creators?” [House Education and Labor hearing, September; earlier here, here, etc.] Related, first and second batch of critical amicus letters;
- Confirmation of nominee Lauren McFerran by lame-duck Senate will lock in union-friendly majority for next two years or so [Sean Higgins, Washington Examiner; Richard Rahn, Washington Times]
- “Congress Must Rein In the NLRB” [Ryan Williams, Roll Call]
- More on presidential candidate Bernie Sanders’ big plans to regulate employment [Cato Daily Podcast with Ryan Bourne and Caleb Brown, related earlier]
- It’s not just the joint employer rules, NLRB is rolling back Obama-era decisions in many other areas too: union elections, including “quickie” procedures [Laura I. Bernstein, Felhaber Larson]; confidentiality in workplace investigations and use of company email systems [Jon Hyman]
- California Agricultural Labor Relations Board adopts a regulation entitling union organizers to enter farms whether owners approve or no. When such a mass incursion, with bullhorns, disrupts farm operations, has a taking of property occurred? Ninth Circuit says no [Pacific Legal Foundation; Metropolitan News-Enterprise; Federalist Society podcast with Wen Fa and Bethany Berger]
- Study based on tax data finds typical member of top-earning 1% “derives most of his or her income from human capital, not financial capital” [David Henderson] Or on the other hand: “The [analytic] attempt to divide all income between labor and capital is a fool’s errand.” [Arnold Kling]
- “Both the financial market crash and the aging of America’s industrial workforce are real phenomena. They did not, however, cause the multiemployer pension crisis.” [Charles Blahous, Economics21; more by Blahous here, here, and here; earlier]
- Supervisor’s remarks critical of exercising FMLA leave options keep nurse’s lawsuit alive despite clients’ complaints about her behavior while visiting their homes [Ronald Tang, SHRM]
In March and April, the U.S. Department of Labor issued notices of proposed rulemaking on two of the most hotly contested issues of its predecessor Obama department, overtime for junior managers and the joint-employer rule. Tammy McCutchen:
The DOL proposes to increase the minimum salary for exemption from $455 per week ($23,660 annualized) to $679 per week ($35,308 annualized)…. If adopted, the proposed rule would replace the final rule issued by the DOL on May 19, 2016, but enjoined by the Eastern District of Texas just weeks before its December 1, 2016 effective date. The 2016 final rule would have increased the minimum salary for exemption to $913 per week ($47,476 annualized)
Earlier here and here. In addition, DoL is proposing to clarify what times of compensation and benefits employers must include in the overtime calculations.
Separately, DoL’s proposed rule on joint employment
would replace the January 2016 Administrator’s Interpretation on joint employment, which did not go through the notice-and-comment rulemaking process and was withdrawn in June 2017.
Under the FLSA, companies found to be joint employers are jointly liable for all minimum wage and overtime violations. The statute does not include a definition of joint employment and has left this determination to the courts.
The joint employment issue has become increasingly important since the National Labor Relations Board (NLRB) dramatically expanded the definition during the Obama administration in the Browning Ferris decision, recently partially affirmed but remanded to the NLRB by the D.C. Circuit. The Trump NLRB has undertaken a rulemaking of its own, proposing to narrow the joint employer definition under the National Labor Relations Act, so as to restore the law, essentially, as it stood prior to Browning Ferris. The NLRB is currently poring over thousands of comments filed for and against its proposed rule. A final joint employer rule is expected from that agency by year end.
The joint employment concept is important because, among other matters, it determines when one employer (typically larger) can be held liable for the actions of another, such as a contractor or franchisee. The proposal would adopt a definition of joint employer originating in a 1983 Ninth Circuit decision in Bonnette v. California Health and Welfare Agency, which does not sweep as broadly as the later definition adopted by the NLRB in Browning-Ferris and by the Obama administration. More: McCutchen podcast on all three issues.
- Not headed to Gotham after all: “The RWDSU union was interested in organizing the Whole Foods grocery store workers, a subsidiary owned by Amazon, and they deployed several ‘community based organizations’ (which RWDSU funds) to oppose the Amazon transaction as negotiation leverage. It backfired.” [Alex Tabarrok]
- “NLRB reverses course and restores some sense to its concerted activity rules” [Jon Hyman, earlier]
- Among papers at the Hoover Institution’s conference last summer on “Land, Labor, and the Rule of Law”: Diana Furchtgott-Roth, “Executive Branch Overreach in Labor Regulation” discusses persuader, fiduciary, overtime, joint employer, independent contractor, federal contract blacklist, campus recruitment as age discrimination, and more; Price Fishback, “Rule of Law in Labor Relations, 1898-1940” on how reducing violence was a key objective of pro-union laws, anti-union laws, and arbitration laws; and related video; Christos Andreas Makridis, “Do Right-to-Work Laws Work? Evidence from Individual Well-being and Economic Sentiment” (“Contrary to conventional wisdom, RTW laws raise employee well-being and sentiment by improving workplace conditions and culture”) and related video;
- Relief coming on NLRB’s Browning-Ferris joint employer initiative? [Federalist Society panel video with Richard Epstein, Richard F. Griffin, Jr., Philip Miscimarra, moderated by Judge Timothy Tymkovich; Philip Rosen et al., Jackson Lewis; earlier]
- “Production company hires union labor after Boston officials allegedly threaten to withhold permits for music festivals. District court: Can’t try the officials for extortion because they didn’t obtain any personal benefit; the alleged benefits went to the union. First Circuit: The indictment should not have been dismissed.” [John K. Ross, IJ “Short Circuit,” on U.S. v. Brissette, earlier]
- In 1922 a brutal mob attack resulted in the slaughter of 23 strikebreakers in Herrin, Illinois. Maybe something that should be taught in schools? [Robby Soave, Reason]
- “I’m lovin’ it: McDonald’s settles joint employer case with NLRB” [Jon Hyman] Will NLRB junk its joint employer doctrine once and for all? [Scott Shackford, Reason, in December] String of welcome NLRB rulings on other topics in late 2017 [Sharon Block, On Labor, who should not be held responsible for my evaluation of the decisions as welcome] More: Connor Wolf, Inside Sources;
- Union opt-out window at U.S. Dept. of Education will be open more than one 48-hour period per year [Frederick Hess and Grant Addison, AEI] Spot the logical flaw: claim that Janus and Masterpiece Cakeshop cases could combine to create new First Amendment right for public school teachers to strike [Andrew Strom, On Labor]
- Eighth Circuit: federal labor law doesn’t protect workers against firing over IWW flyer-posting campaign falsely claiming restaurant’s food is unsafe [Daniel Pasternak, Employment Law Worldview; earlier here and here on Jimmy John’s/MikLin dispute]
- Mark Pulliam remembers a giant of labor law, Prof. Sylvester Petro [Misrule of Law]
- In Britain, Royal Mail cooperates with some of its union locals after they vote not to deliver Mr. Murdoch’s Sun paper to homes [Adam Withnall, Independent]
- One libertarian economist’s view of right to work laws [David R. Henderson] Municipal home rule ventures into labor regulation can work both ways: “Local Right-to-Work Case Has National Implications” [Connor Wolf, Inside Sources on Lincolnshire, Ill. RTW ordinance before Seventh Circuit]
- Chicago and Cook County paid sick leave ordinances spell “major headaches” for employers [Kimberly Ross and Craig Thorstenson, Ford Harrison]
- “DoL Withdraws Joint Employer Guidance” [Kim Slowey/ ConstructionDive, Catherine Strauss and Tami Earnhart, earlier here, etc.]
- How South Dakota came to deregulate hair braiding [John Hult, Sioux Falls Argus-Leader]
- Emmanuel Macron has big plans, very much including reform of France’s deeply un-libertarian labor law [Sylvain Cypel, New York Review of Books]
- State of play at NLRB on employees’ taping things: “You can still limit recordings in your workplace, as long as you don’t ban all recordings outright.” [Janette Levey Frisch]
- Over business protests, NYC’s left-leaning council and mayor keep enacting union-backed burdens on employers [Connor Wolf, earlier; related here, here, here, etc.]