(Bloomberg) — More companies may be held responsible for labor-law violations committed by contractors and forced to negotiate wages and benefits with their workers under a decision by a politically split U.S. labor board.
The National Labor Relations Board (NLRB), in a closely watched case, on Thursday unveiled a new standard for determining which companies are “joint employers” of workers paid by another business such as a franchisee or contractor.
Previously, employers were responsible only if they had direct control over working conditions. The standard, in use for three decades, is “increasingly out of step with changing economic circumstances, particularly the recent dramatic growth in contingent employment relationships,” the board ruled.
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The case involved a Teamsters organizing drive of employees at a staffing facility who were working in a recycling facility owned by Browning-Ferris Industries Inc., a Houston-based waste management company. The case drew attention from labor, businesses and Republicans in Congress, who vow to try to block the panel’s decision.
The decision will be applied in separate cases pending against McDonald’s Corp. in which the labor board’s general counsel has accused the restaurant chain of labor violations at its franchisees.
The board cited a rise in temporary employment in its decision. Almost 2.9 million Americans had jobs through temporary agencies in 2014, or 2 percent of the workforce, up from 1.1 million in 1990, the board said.
The NLRB’s change means that companies that have the power to influence the conditions of workers through contracts or franchise agreements may be deemed joint employers. Business groups said now companies would become less efficient by tying them more directly to their contractors or other businesses that are now a step removed.
The International Franchise Association, a Washington-based business group, said the decision is a “seismic shift” in labor law.
“If allowed to go into effect, the impact of this new joint-employer rule would be sweeping and widespread, create havoc for the franchise industry and, ultimately, would inflict serious damage to our nation’s economy,” Steve Caldeira, the group’s chief executive, said in a statement.