So you work for McDonald’s, or you think you work for McDonald’s?

(How the NLRB’s Overruling of the Browning-Ferris Industries Decision Might Affect You)

Last week, the National Labor Relations Board (NLRB) overruled the 2015 case known as Browning-Ferris Industries 1. This controversial 3-2 ruling in the case Hy-Brand Industrial Contractors shifts labor law, as it relates to joint-employer liability, back to the pre-Browning Ferris standard 2. Some argue that this is another manifestation of the Trump Administration favoring corporations over the working class. Others are relieved, arguing that rejecting the Browning-Ferris Industries case brings back clarity to small businesses and corporations across the country. Here’s what you need to know:
How the NLRB's Overruling of the Browning-Ferris Industries Decision Might Affect You

Background: What is the NLRB?

The NLRB is an independent government agency designed to oversee collective bargaining and unfair labor practices as they relate to United States labor law. Collective bargaining refers to the process by which working people come to their employers in groups (which might or might not be formal unions) to negotiate contracts that determine pay, hours, benefits, safety, etc. Facing employers in groups gives employees more leverage on employers to solve workplace problems. When employers take certain actions that violate US labor law in how it governs these agreements, the NLRB investigates and remedies such actions. For example, the NLRB makes it unlawful for an employer to interfere with groups of employees attempting to form a labor organization, discriminate against employees for filing charges with the NLRB, or refusing to bargain with unions that were lawfully made by employees, to name a few.

The Old Ruling vs. the New Ruling

The overturned Browning-Ferris Industries decision was centered on who the NLRB can hold responsible for unfair labor practices in situations – in other words, who could be held liable as a “joint employer” for labor violations. Under Browning-Ferris Industries, contract workers hired through a staffing agency were found to be jointly employed by the recycling plant they worked at, even though they were not directly employed by the recycling center. In the new Hy-Brand Industries decision, the NLRB said following:

We find that the Browning-Ferris 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. Accordingly, we overrule Browning-Ferris and return to the principles governing joint-employer status that existed prior to that decision.

Thus, a finding of joint-employer status requires proof that the alleged joint-employer entities have actually exercised joint control over essential employment terms (rather than merely having “reserved” the right to exercise control), the control must be “direct and immediate” (rather than indirect), and joint-employer status will not result from control that is “limited and routine.”

The decision applies to all future and pending cases.

In essence, the new ruling rejects Browning-Ferris Industries and reverts back to the pre-Browning Ferris era standard to determine joint-employer status. Under the law now, joint employers will be held responsible for unfair labor practices if: 1) there is proof that the alleged joint-employer entities have actually exercised joint control over essential employment terms; 2) the control asserted by the employer is direct and immediate; and 3) control is not limited and routine.

What does this ruling mean in practice?

While this decision may seem irrelevant to you, its effects are far-reaching, especially for businesses that operate under a franchise model. Consider McDonald’s, the world’s largest and 8th fastest growing franchise model. Under the new rule, McDonald’s will be held responsible for how employees are treated, as related to US labor law, only when the employer proves that McDonald’s directly and immediately exercised joint control over essential employment terms, and that such control was not limited and routine. In most circumstances, McDonald’s, as franchisor, would not be responsible for unfair treatment to employees and liability would instead be on the franchisee of the restaurant. Under the old Browning Ferris standard, there’s a very good chance that McDonald’s (the franchisor) could be held liable to employment violations that occurred in a franchisee’s operations.

For employers, the burden caused by the new ruling is light. You might want to make some changes in employer handbooks, policies, and rules in accordance with the new standard. Additionally, you might consider auditing such rules in practice to determine what changes in conduct are necessary. For employees, carefully choose where you work and who you work for. In the end, the person liable for unfair labor treatment might not be the entity with deep pockets able to compensate you for unjust treatment.

What side are you on?

What side you’re on really depends on what you do for a living, who you know, and what you advocate for.

Employee and worker advocates might argue that reverting to the old standard allows big corporations to turn a blind eye to franchisees who commit labor violations. Furthermore, worker advocates could argue that the new ruling will preclude employees from full compensation for their unjust treatment.

As an advocate for workers, executive director of the National Employment Law Project, Christine Owens responded to the new ruling, stating that “employers are increasingly subcontracting . . . and/or using temporary employment agencies to fill vital positions. The Browning-Ferris decision recognized that in these arrangements, companies that contract out work may still retain control over the conditions and standards that govern the work and how the workers doing the jobs are treated. Browning-Ferris rightly held these companies responsible for the labor standards under their own control. With this reversal, the Trump NLRB has decided to let them off the hook.”

On the other hand, business advocates will argue that the new ruling revives the clearer standard, which allows them to franchise their business more confidently and avoid unwarranted employee claims, which decreases costs and benefits everyone. As an advocate for corporations and small businesses, Cicely Simpson of The National Restaurant Association praised the recent Hy-Brand Industrial decision, stating “[t]oday’s decision restores years of established law and brings back clarity for restaurants and small businesses across the country.”

What we can do for you

Regardless of your stance on the overruling of Browning-Ferris Industries, you now live in a world where an employee is only an employee of a franchisor, or parent corporation, if that company has direct control over that employee. While the standard for determining whether a company is a joint employer is clear as of last week, your facts and circumstances as they apply are probably not so clear. Our experienced employment and franchise law attorneys are here for you and prepared to take your case today.

Approved By:
Brad Denton, Arizona Business lawyer Brad DentonDenton Peterson, PC

1930 N Arboleda #200
Mesa, AZ 85213

Office: 480-325-9900
Email: [email protected]

1Browning-Ferris Industries, 362 NLRB No. 186 (2015)
2 Hy-Brand Industrial Contractors Ltd., 365 No. 156 (December 14, 2017)