On Tuesday, a government agency redefined who is an "employer," changing who is liable for labor violations and how unions can negotiate.
That agency, the Republican-led National Labor Relations Board (NLRB), reversed a ruling that held companies accountable for labor violations committed by contractors and that required them to negotiate with unions.
Back in 2015, a Democratic-majority NLRB held that the company Browning-Ferris should be considered a "joint employer" of workers it hired through a temp agency. The decision set precedent that allowed more workers to sue for violations and more labor unions to organize in industries with many contractors and franchises, like construction and fast food.
Why is it important?
In the new decision, the NLRB ruled a company would be considered the employer of workers it "directly and immediately" controls. That reduces the likelihood of unions gaining higher pay or better benefits from the larger, wealthier company. It also may prevent people from unionizing at all; The decision allows a company to fire a contractor if its workers try to form a union and collectively negotiate.
McDonalds, for example, would not be liable for labor violations in its franchise restaurants, nor would it be required to negotiate with unions of workers in those chains.
This is one among several agencies reversing Obama-era rules under President Trump; On Thursday, the Federal Communications Commission's abolished net neutrality.
Should companies be required to negotiate with contractors' unions?
The NLRB made the right decision on Tuesday, based on the economic landscape we have today.
Today, just 11% of workers are members of a union. In the 1950's, more than a third of the workforce was unionized.
That decline is reasonable: Research shows that recently unionized firms employ fewer people, pay lower average wages, and are more likely to go out of business. The lower wages likely comes not from actual salary cuts but from high performers leaving when union requirements prevent companies from offering them higher pay.
The NLRB this week found that the board had overturned "decades of labor law precedent and probably centuries of precedent in corporate law" and, worse, had no mandate from Congress to do it.
The ambiguity in the previous law created misplaced incentives for companies. As the chairman of the National Association of Home Builders made the point that the "Browning-Ferris decision in 2015 made the standard for joint employment so broad and vague that an employer could be held liable for the labor and employment practices of independent contractors and subcontractors over which they have no direct control." Should they be required to exert more control? Would that be a good thing for workers?
In the words of Cicely Simpson, executive vice president of the National Restaurant Association, the rule "stacked the deck against small businesses and inserted uncertainty into day-to-day operations." She continued, "Today’s decision restores years of established law and brings back clarity for restaurants and small businesses across the country."
The NLRB was right in 2015: labor laws need to change to keep up with changing labor conditions.
This is crucial to a well-functioning and fair economy. Labor unions play an important role in our history—and continue to do so, in ways many don't realize. They helped end sweatshops and child labor, fought for better pay and retirement benefits, and elevated the standard of living of millions of Americans.
Today, keeping unions healthy is just as important. Rocket scientists, actors, football players, writers, architects—all these professions have unions for good reason. Unions run the largest career training program outside the military. Union membership "raises living and working standards for all working men and women—union and non-union. When union membership rates are high, so is the share of income that goes to the middle class. When those rates fall, income inequality grows—the middle class shrinks and the 1% gets richer."
Two years ago, the labor board realized that "the changing structure of the economy—in which employers have steadily pushed workers outside their firms and into a throng of contractors, franchises and staffing agencies—required updating doctrine to stay true to the intent of labor law." Of course it does. Imagine the common instance where the company controls the working conditions of its contractors to the point that no meaningful negotiation between union and employer could take place without it. They set schedules, mandate practices that create safety concerns, and give the contractor a margin that practically speaking mandates workers' pay.If no real conversation can happen between employee and employer without you, shouldn't you be considered an employer too?
- The NLRB's decision in 2015
- "In the decision, the Board applies long-established principles to find that 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 NLRB's decision on Tuesday
- "In all future and pending cases, two or more entities will be deemed joint employers under the National Labor Relations Act (NLRA) if there is proof that one entity has exercised control over essential employment terms of another entity’s employees (rather than merely having reserved the right to exercise control) and has done so directly and immediately (rather than indirectly) in a manner that is not limited and routine."