The National Labor Relations Board announced a new regulation Tuesday that makes it harder to challenge companies over their labor practices, potentially affecting the rights of millions of workers.
The rule, which will take effect April 27, scales back the responsibility of companies like McDonald’s for labor-law violations by their franchisees, such as firing workers in retaliation for attempts to unionize. The rule also applies to workers employed through contractors like staffing agencies or cleaning services.
That is a reversal of the doctrine that the board adopted late in the Obama administration, which had made it possible to deem a much wider range of parent companies to be so-called joint employers.
The Obama-era standard, established in 2015, said a parent company could be considered a joint employer of workers at a franchisee or contractor even if it controlled those employees only indirectly. For example, a company could be a joint employer if it required franchisees to use software that imposed certain scheduling practices. The parent company could also be considered a joint employer if it had a right to control the franchisee’s employees even if it hadn’t exercised that right.
Under the new rule, the parent company will share liability for violations committed by contractors or franchisees only if the parent has substantial, direct and immediate control over the other companies’ employees – including their pay, benefits, hours, hiring, firing or supervision.
In the case of fast-food franchises, the parent company would probably have to directly determine scheduling practices, and perhaps other working conditions, to be considered a joint employer.
The new rule could also make it more difficult for employees of contractors and franchisees to unionize. A parent company that chooses to shut down a franchise when employees of that franchise are seeking to unionize is likely to face legal risk only if it is deemed a joint employer. Workers and union officials have sometimes accused parent companies of this tactic, though the companies and industry associations have denied this happens.
The labor board, which gained a Republican majority in 2017, first sought to reverse the Obama-era standard in a ruling late that year. But the board voted to vacate that ruling after its inspector general found that a Republican board member had a potential conflict of interest and should not have taken part.