During a relatively sedate hearing to consider the nomination of Lauren McFerran to serve as a member of the National Labor Relations Board, the issue of joint employment and franchisor liability took center stage, at least for the Republican members of the Senate Committee on Health, Education, Labor and Pensions (HELP). 

Last week President Obama surprised many by withdrawing his nomination of former NLRB recess appointee Sharon Block and nominating McFerran, the HELP Committee's chief labor counsel, to replace outgoing member Nancy Schiffer, whose term expires on December 16, 2014. HELP Committee Chairman Tom Harkin (D-IA) began the hearing by noting the Committee had approved Sharon Block's nomination, but lamented "it was withdrawn in the face of circumstances totally beyond her control." Ranking member Lamar Alexander (R-TN), however, considered the withdrawal of Block's nomination a "gesture of respect" to the Senate following the Supreme Court's decision in Noel Canning that Block's recess appointment was unlawful.    

Sen. Richard Burr (R-NC) attempted to elicit McFerran's opinion on who should be considered an "employer" for liability purposes, but she did not take the bait. Instead, she responded that defining who is an employer is an issue that might be something she would have to address as a member of the Board, so she declined to delve into the issue. She said she did not want to prejudge the matter, and that such inquiries are likely fact-specific and "difficult to answer in the abstract." 

Recognizing that he would not likely get a more detailed response, Sen. Burr used the opportunity to discuss where the Board appears to be headed on the joint-employer issue, particularly how it would affect the franchise industry. As we've previously discussed, the Board's General Counsel Richard Griffin announced this summer that his office intends to name a parent franchisor as a respondent in cases involving alleged unfair labor practices committed by franchisees, if the parties are unable to reach a settlement. Meanwhile, the Board has yet to issue a decision in Browning-Ferris, in which the agency is reconsidering the 30-year-old standard it uses to determine joint employment under the National Labor Relations Act.  Griffin has advocated a change in this standard.

Burr noted that he has disagreements not just with the NLRB but with other agencies on the joint employment issue.  "Where we're headed doesn't pass the smell test," he said. He criticized the Board's position as being "so far outside of what the public believes" regarding who an employer actually is. Burr decried the possibility that "someone who is not involved with the workplace's management, contract of employment, payment of a check, funding of a check" could be "somehow in the chain of liability" and thus responsible for the wrong decision of a franchisee. According to Burr, such a position "has implications to economic growth that could be devastating to this country." He cautioned: "I'll tell you what's going to happen. We're going to kill the franchise industries of America. That's the engine of the American economy. I want to rev it up, not kill it."  He impressed upon McFerran to "understand the implications of what you're getting ready to do." 

Sen. Lamar Alexander (R-TN) picked up on this idea. He said that for people without a lot of capital, becoming a franchisee is a viable business alternative.  Imputing liability on the franchisor for a franchisee's actions could "wipe out the opportunity for a person to be a franchisee." He noted further "what a breathtakingly important step it would be if the NLRB would suddenly decide that a franchisor would be liable for the actions of a franchisee."

McFerran said she is not an expert on business ownership, but would consider all positions should she become a Board member.  

Sen. Alexander emphasized that it should be a member of Congress who changes the long-standing law, not the NLRB, and that there is a "good reason" to keep a clear line between the franchisor and franchisee.  Sen. Harkin said "depending on how it goes," he assumes that as some point Congress will address the issue.  

Alexander noted also during the hearing that it was "no secret" that one of his biggest concerns about the NLRB has been its growing partisanship. He expressed hope that McFerran would "strive to be an impartial decision-maker," and hoped to see more stability at the Board. He reminded members that he and Sen. Mitch McConnell (R-KY) have introduced legislation that would, among other things, expand the Board from five members to six, three Republicans and three Democrats; require a majority of four members to make a decision to encourage consensus from both sides; stagger the  members' terms and synchronize them in pairs, with one member from each political party facing confirmation at the same time; and allow parties to challenge the General Counsel's decisions in federal court.  He said his bill is intended to make the NLRB more of an umpire than an advocate, and address what he believes are "problems of a free-wheeling General Counsel." 

For her part, McFerran acknowledged that if confirmed, her role would "change dramatically" from that required of her current position on the HELP Committee.  She said she would decide cases "consistent with the language, goals, and purposes of the [National Labor Relations] Act."

She evaded questions about matters that she might wind up considering as a member of the Board, such as her position on student athlete unionization, as she did not want to prejudge the issues.  

Harkin estimated that the HELP Committee would vote on the advancement of McFerran's nomination sometime after Thanksgiving. An archived webcast of the hearing can be found here.