New National Labor Relations Board Ruling is Going to be a Major Problem for Fast Food Chains

The National Labor Relations Board, in a long-awaited ruling, made it easier on Thursday for unions to negotiate on behalf of workers at fast-food chains and other companies relying on contractors and franchisees.

The labor board, changed the definition of a crucial employer-employee relationship that had held in some form since the Reagan era of the 1980s.

Now, a company that hires a contractor to staff its facilities may be considered a so-called joint employer of the workers at that facility, even if it does not actively supervise them.

A union representing those workers would be legally entitled to bargain with the parent company, not just the contractor, under federal labor law.

NYT explains:

“The decision today could be one of the more significant by the N.L.R.B. in the last 35 years,” said Marshall B. Babson, a lawyer who helped write a brief opposing the rule for the U.S. Chamber of Commerce. “Depending on how the board applies its new ‘indirect test,’ it will likely ensnare an ever-widening circle of employers and bargaining relationships.”

For example, if employees at a fast-food restaurant run by a franchisee were to unionize — something almost none have succeeded in doing to date — they would immediately be entitled to negotiate not just with the owner of the individual restaurant but also with the corporate headquarters.

If the corporate parent were to agree to pay higher wages or provide better benefits, it would apply only to that particular restaurant, in the same way that concessions granted to employees in a single unionized portion of a national company that is not franchised apply only to that portion. At the same time, however, the concessions may give unionized employees at other locations practical leverage in their negotiations with the company.

Many large companies maintain that they should not be required to bargain with employees of their contractors or franchisees...

The ruling may have an immediate effect on a case the labor board is litigating against McDonald’s and several of its franchisees. In that case, the N.L.R.B.’s general counsel, who essentially acts as a prosecutor, asserts that the company is a joint employer along with a number of franchisees, making it potentially liable for numerous reported violations of workers’ rights, like retaliating against those who have tried to organize unions.

Business representatives said the labor board was making it much harder to operate franchises in the future, undermining a popular path for many entrepreneurs.

Richard Adams, a former McDonald’s franchisee who runs a franchise consulting firm, said the ruling made no sense to him, given how most franchise businesses operate.

“It’s so far from the reality of what actually takes place in the business that it can’t have any practical application,” Mr. Adams said. “McDonald’s doesn’t control these employees — it doesn’t hire them, it doesn’t train them, it doesn’t supervise them, it doesn’t pay them, it doesn’t even have their Social Security numbers.”

This is going to be a regulatory nightmare,that will include  harassment of corporations by franchise employees, at the instigation of union operatives, It will take the franchiser/franchisee relationship to an unnecessary much more complex level.

 -RW