Republican-led labor board overturns Obama-era 'joint employment' ruling

McDonald's Protest

That would include contractors, subcontractors, staffing agencies and franchisees.

The National Labor Relations Board reversed an Obama-era ruling Thursday that had made employers potentially liable for labor-law violations committed by their subcontractors.

Prior to the 2015 ruling in Browning-Ferris, companies were found to be joint employers of workers hired by another business if they had "direct and immediate" control over working conditions. Following the Board's ruling, the test for determining joint employer status will be returned to its pre-Browning-Ferris state, which required a stronger showing of employer control in order to find a joint employer relationship. The Hy-Brand Board wrote: "the [BFI] standard is a distortion of common law as interpreted by the Board and the courts, it is contrary to the Act, it is ill-advised as a matter of policy, and its application would prevent the Board from discharging one of its primary responsibilities under the Act, which is to foster stability in labor-management relations".

In the Browning-Ferris decision, the NLRB changed that to say joint employment could also exist when companies have only "indirect or unexercised control" over workers. This reality greatly impacted franchises and contractors.

"W$3 e return today to a standard that has served labor law and collective bargaining well, a standard that is understandable and rooted in the real world", Chairman Philip A. Miscimarra (R) and Members Marvin E. Kaplan (R) and William J. Emanuel (R) said in a 3-2 ruling.

Today's action by the NLRB comes just over a month after the House voted 242-181 to pass the Save Local Business Act, legislation supported by NRF that would have overturned the Browning-Ferris decision if the NLRB had not acted.

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"This case is not a proper vehicle for reconsidering the joint-employer standard to begin with, and the majority's failure to permit public participation only worsens matters", according to the dissent. "The majority starts with a willful misunderstanding of the joint-employer standard adopted in BFI and ends by reverting to a standard that, before today, the board had never even attempted to justify in terms of the common-law principles that must guide us".

The free-market Competitive Enterprise Institute called the ruling "a crucial victory for entrepreneurs and workers nationwide" that overturned the "infamous joint employer case that threatened to ensnare countless American businesses in vast but vague new employer liability". The U.S. Chamber of Commerce, the National Retail Federation and other trade groups also applauded the decision, which came in a case involving two construction companies based in Iowa and IL.

The owners of the companies fired all seven of the workers.

The International Franchise Association and National Restaurant Association, which represents McDonald's Corp. and other fast-food restaurant operators, have been especially vocal critics of the Browning-Ferris standard, arguing that it could doom the franchising industry.

The restaurant association said in a statement that Thursday's decision "restores years of established law and brings back clarity for restaurants and small businesses across the country".

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