NLRB Decision Casts Large Shadow

The National Labor Relations Board issued a 3-2 decision in the Browning-Ferris Industries of California case on Aug. 27 that expands the definition of “joint employer.” It’s now defined as two or more employers of a single workforce that share the authority to govern basic terms and conditions of employment. With this new definition in place, workers have the right to bargain with all employers for pay, benefits, and working conditions, even if they are employed by an outsourced agency.

The case applies specifically to the staffing agency that supplies workers to Browning-Ferris Industries, a waste management company, but the magnitude of the decision is raising concerns for leaser, supplier, creditor, and contractor relationships, as well as for franchisor relationships, on which the hospitality industry relies heavily.

Bernie Moyle, COO and CFO of Vantage Hospitality, says he believes the decision is overreaching. “The NLRB has taken a big swat at employer/employee relations, and they’ve disrupted the workplace,” Moyle says. “They’ve scared the industry and frightened the franchisor/franchisee world. That gives me pause.”

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Vantage Hospitality doesn’t have substantial control over a franchisee’s business, nor does the company dictate the number of hours or salary of a franchisee’s employees, Moyle explains. As a Florida Restaurant & Lodging Association board member, Moyle stressed the importance of educating lawmakers on this issue. The Browning-Ferris case is fact-specific, he adds, not a general application for franchisor-franchisee relationships. “Don’t create a law that casts a dark cloud over our industry, and certainly within the franchise industry, please don’t think all franchise relationships are the same, because they’re not.”

Most franchisees in the Vantage Hospitality system run a single, family-owned hotel, Moyle says. “Of our 1,200 members, about 90 percent of them own one hotel and probably only have 10 to 15 employees, sometimes less. And many of them work at their own property. When you label this as a ‘franchisor-franchisee discussion,’ you’re throwing a big broad blanket over the whole franchise concept, which I think is a gross error.”

Brian Crawford, vice president of government and political affairs at the American Hotel & Lodging Association (AH&LA), says the real concern with the ruling is that due to its ambiguous nature, it could open AH&LA members up to joint-employer liability based on contractual relationships.

“Our fear is that you’ll see an increase in unfair labor practice charges brought by employees of subcontractors,” says Crawford. “You could have laundry services or landscaping or pool maintenance—unfair labor practice charges brought by the employees of subcontractors, where there would be a joint employer liability found, so that the brand or the hotel owner would be jointly liable with the subcontractor that’s also doing work at the hotel property.”

The “Protecting Local Business Opportunity Act,” introduced by Rep. John Kline (R-Minn.) and Sen. Lamar Alexander (R.-Tenn.), would restore the prior long-standing joint employer standard. The amendment states: “Notwithstanding any other provision of this Act, two or more employers may be considered joint employers for purposes of this Act only if each shares and exercises control over essential terms and conditions of employment and such control over these matters is actual, direct, and immediate.”

The House of Representatives has held a hearing on the bill, and the Senate will do the same on its version of the bill in the coming days. While Crawford says AH&LA has received indications that the House and Senate expect to see both bills receive floor time this fall, scheduling may stand in the way of the “Protecting Local Business Opportunity Act” progressing, as there are many pressing issues before Congress.

Crawford notes that as the Democratic majority made the decision with two Republicans dissenting, whether President Barack Obama would even sign the bill into law is uncertain.

“We are exploring other potential legislative vehicles to try to attach it to–potentially an appropriations bill, or end-of-the-year spending bill–we’re trying to be strategic about where and when this legislation comes up to try to increase the likelihood that it could reach the president’s desk,” says Crawford.

In the meantime, he says companies take steps with their attorneys to ensure current contracts will not dredge up the same issues that faced Browning-Ferris and its subcontractor. Ultimately, Crawford says he is concerned with how the ruling will leave small businesses in the dust in favor of no-risk, in-house operations.

“It makes more sense from a dollars and cents perspective to keep all the operations in-house so that you’re not exposed to future joint employer liability,” he says. “You’re going to see a situation where big businesses get bigger, and small businesses get squeezed out of the equation.”

Additional reporting by Megan Sullivan