The US National Labor Relations Board, Department of Labor and Equal Employment Opportunity Commission have launched a coordinated prosecutorial assault on businesses that use outsourcing, franchising or sub-contracting.  The government’s agenda is unabashedly activist and pro-union.

Management lawyers need to follow these developments closely, because they will have far-reaching impact on business practices, business transactions and litigation. Clients should be advised to review their policies, procedures, business relationships and practice now to limit their risk.

Prominently in the news is the NLRB’s published prosecutorial agenda, including:

  • Increasing scrutiny and involvement in the non-union workplace
  • Expediting the process for conducting union representation elections
  • Broadening a successor company’s obligation to bargain
  • Voiding arbitration agreements with class action prohibitions
  • Restricting confidentiality rules during employer investigations
  • Expanding rights to representation in the nonunion workplace and
  • Restricting employer policies concerning at-will employment, confidentiality, workplace decorum, social media and employee/union use of employer email systems.

A pending case is both illustrative and hyper-significant because it affects every business that subcontracts or outsources any function. In Browning-Ferris Industries of California, Inc., et al., v. Sanitary Truck Drivers and Helpers Local 350, International Brotherhood of Teamsters the NLRB is reconsidering the historic joint employer standard. Currently, legally separate business entities are joint employers onlywhen they actually share the control or co-determine the essential terms and conditions of employment (i.e., hiring, firing, wages, hours and working conditions, discipline, supervision, and direction of employees).  The test requires the putative joint employer’s control over these employment conditions to be direct and immediate.

In Browning-Ferris, the NLRB general counsel (a former union attorney) has advocated outright abandonment of the current standard. He proposes adoption of a new test that will significantly broaden the reach of the joint employer doctrine by eliminating the requirement for direct control, and making indirect and potential control sufficient to establish a joint employer relationship. The NLRB’s general counsel also asserts that joint employer status should exist where “industrial realities” make the putative joint employer essential for meaningful bargaining. Under this loose standard nearly every large company with deep pockets will be presumed to be a joint employer with those businesses to which it subcontracts, uses temporary employees and even in the franchisor/franchisee relationship. The NLRB is expected to adopt the new standard when it issues its decision.

On July 29, the NLRB Office of the General Counsel announced that (barring settlement) the NLRB would issue formal complaints against McDonald’s Corporation as a joint employer. Currently, there are 43 pending unfair labor practice charges in which the NLRB has indicated McDonald’s Corporation would be listed as a joint employer. Since August, over 50 new unfair labor practice have been filed against other businesses under this new joint employer theory.

The EEOC fully supports the broader standard, and the DOL has embarked on the same enforcement strategy under the leadership of David Weil, recently appointed to run the Wage and Hour Division. He is the author of The Fissured Workplace: Why Work Became So Bad for So Many and What Can Be Done to Improve It. Using the broader joint employer standard, the DOL is prosecuting companies that use outsourcing, franchising, or sub-contracting for “wage theft” when the businesses performing the outsourced work violate wage and hour laws.

Simply stated, each of the three key federal government prosecutors of labor, employment and wage-hour violations intends to expand the traditional definitions of “joint employer.” This shift in prosecutorial discretion now must be factored into business decision-making, including transactional due diligence.