Get Started: NLRB ruling can hurt small business, groups say

A National Labor Relations Board ruling that modified the definition of an employer could hurt small businesses including franchises and subcontractors, according to industry groups that advocate for those companies.

The NLRB decision Thursday came in a case involving waste management company Browning-Ferris Industries and a staffing company, Leadpoint Business Services, which supplied workers to Browning-Ferris. The NLRB ruled that Browning-Ferris is a joint employer with Leadpoint. The board said it will consider factors such as whether a company exercised control over employees “indirectly through an intermediary, or whether it has reserved the authority to do so” in determining whether companies are joint employers.

Before the ruling, companies had to have exercised “direct operational and supervisory control” over employees to be considered joint employers.

The written decision did not mention franchises, but two dissenting members of the five-member NLRB listed franchisors and franchisees among the business relationships that would be affected by the ruling.

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The franchise industry is concerned because individually-owned franchises, which are often owned by small companies, could now be drawn into national labor disputes, said the International Franchise Association.

“The new standard would also increase the likelihood of union ‘campaigns’ against national businesses, while forcing small businesses to become engaged in protracted, unnecessary and costly legal battles,” the IFA said in a statement.

Franchises are also concerned because the NLRB’s Office of General Counsel contended earlier this year that McDonald’s has enough control over its franchisees’ operations to be considered a joint employer with the owners of individual restaurants. That opinion was issued prior to a series of hearings on charges brought against McDonald’s and some of its franchisees by employees; the outcome of those hearings is still pending.

Franchise owners have also contended they could lose their autonomy if franchisors become joint employers with them, and therefore can have more say in their hiring and management practices.

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Other small businesses can also be affected, according to the National Federation of Independent Business. It contends a company that hires a subcontractor to do work could be considered a joint employer with the subcontractor.

“Subcontractors will come under pressure by their clients to change their employment policies or they’ll be cut out of the picture altogether,” said Beth Milito, an attorney for the NFIB.

The ruling was also criticized by the National Retail Federation, which said it unnecessarily blurred the distinctions between companies that are independent of one another. The National Restaurant Association said the ruling would have a negative impact on franchisees’ decisions to expand and hire more workers.