Taking note of new NLRB regulation

The National Labor Relations Board has a new regulation that potentially holds one business responsible for the workplace violations at another business, if the former has “reserved control” over the latter. 

“Reserved control” is the potential power to influence another. You don’t have to have actually exercised it; you just might, someday. 

It's part of the agency’s updated “Joint Employer” rule issued in October. 

“Joint employer” is the term for when one business can be said to control another, such as a brand contracting a franchisee (think induvial McDonald's stores), triggering responsibility for any labor violations by the other. 

Traditionally, this type of liability required the first business to have “direct contro.l”

That changed in the Obama administration, when Democrats grew frustrated with the proliferation of franchises, contractors and freelancers that were difficult to regulate or organize for union purposes. 

Democrats appointed to the NLRB began pushing for “indirect control,” a term with no clear definition, in the new standard. 

In theory, any company could be said to have indirect control over another it does business with. Indirect control drastically lowers that standard. 

Theoretically, indirect control requires a business to have done something to influence the other. Reserved control eliminates that. 

An NLRB fact sheet accompanying the rulemaking says, in short, they’re not going to let the fact that the business didn’t do anything pertaining to employment decisions prevent it from holding the business accountable for what it didn’t do. 

The final rule establishes a uniform joint-employer standard, according to NLRB Chairman Lauren McFerran. 

Corporations may react by pulling back from franchising because of the legal risk.

They will either limit franchise opportunities and/or limit their independence and run them directly. That could cut off opportunities for young entrepreneurs, especially in minority communities. 

Unions have pushed for the expansion of the joint employer rule for decades.

The expansion will make it easier for unions to mount organizing campaigns against major franchise chains like McDonald’s. 

Most franchisees are independent businesses that rent the corporate brand.

Under the expanded rule, franchisor corporations are much more likely to be found responsible for violations at franchisees because the parent company arguably has theoretical control through contracts. 

If that is the case, then the corporation can also be said to be the employer. That opens it up to a potential campaign by the union where they pressure the franchisor to agree to unionize all its workers. 

In short, joint employment is a possible means for unions to organize major corporations all at once, rather than by the piecemeal process of one at a time. 

Two of the board’s three Democrat members are longtime union allies. 

(Above "Opinion" article written by Sean Higgins, a research fellow for the Competitive Enterprise Institute, a free market public policy organization based in Washington, D.C.) 

Additional direct info via the Federal Register 10/27/23) Federal Register :: Standard for Determining Joint Employer Status