NLRB Joint Employer Plan Would Stymie ESG Programs, Group Says

Companies will be less likely to participate in ESG programs, corporate social responsibility initiatives, and other standard-setting measures if the federal labor board broadens its test for deciding when separate companies share legal obligations for the same workers, an employer group said.

The National Labor Relations Board’s proposed rule to expand its joint employer test would make participation in environmental, social, and governance programs evidence of a joint employer relationship, according to the HR Policy Association, which represents human resource officers at large corporations.

“Such a result and the increased legal obligations and liability exposure it creates for employers will naturally disincentivize employers from engaging in these types of initiatives to the detriment of the economy and the American worker,” the group told the NLRB.

The HR Policy Association filed one of the more than 11,500 public comments posted as of Thursday on the NLRB’s plan to amend its joint employer standard, which has been one of the most heavily contested issues in federal labor law over the past decade. The board’s deadline for taking comments was Wednesday.

Businesses found to be joint employers share liability for unfair labor practices as well as union bargaining obligations, a crucial issue for companies involved in franchising and those that rely on staffing firms, subcontractors, or other business-to-business relationships that supply labor.

The NLRB’s Democratic majority’s proposal, released in September, would expand what factors can trigger a joint-employer finding beyond simply one business exerting direct and immediate control over another company’s employees. The new test also would consider indirect and unexercised control.

The proposed rule would replace the stricter joint employment standard that an all-Republican NLRB issued via regulation in 2020. The board has yet to apply that version of the legal test, which negated a more expansive test from the 2015 decision in Browning-Ferris Industries.

The NLRB must review the input and address criticism in the preamble to its final rule, or else become vulnerable to a legal challenge.

Franchising on Front Line

The public comments submitted show that joint employment continues to be a major issue for the franchise industry.

Roughly 2,200 individuals filed substantively identical comments saying the proposal “would inflict great harm on my business and the more than 733,000 franchise establishments in the United States, which support nearly 8.4 million jobs and $787.5 billion of economic output for the economy.”

The broadened legal test in Browning-Ferris led to a dramatic spike in unfair labor practice charges and union representation petitions alleging that franchise owners were joint employers, the International Franchise Association said in its comments on the proposed rule. The NLRB received 236 of those filings from July 2014 to July 2018, nearly double the amount that was filed with the agency during the previous four years, the group said.

A bipartisan group of six US senators—including influential Democrats Joe Manchin (W.Va.) and Kyrsten Sinema (Ariz.)—asked the NLRB to “reconsider moving forward” with the joint employer proposal because of their “concern with the potential impact that the proposed rule will have on the franchise model.”

McDonald’s USA LLC argued that the board’s proposal “threatens to destroy” the franchise model because it would put any franchisor at risk of being found a joint employer with its franchisees. About 95% of McDonald’s 14,000 US locations are run by franchisees.

The company prevailed in a massive NLRB joint employer case that started during the Obama administration and settled after the Trump-appointed general counsel took over the agency’s legal arm in 2017.

But the franchising model can protect large companies from accountability for misdeeds committed at the smaller outlets that they control, the American Civil Liberties Union said, citing a failed discrimination lawsuit it litigated against McDonald’s. The judge dismissed joint employer claims brought under Title VII of the 1964 Civil Rights Act—which has a similar definition of “employer” as the National Labor Relations Act—despite evidence of the company’s control, the ACLU said.

“Decisions like this allow corporate entities that pull the strings to continue to say ‘not it’ and ignore when workers suffer from labor law violations that result from systemic gaps and defects in workplace policies,” the group said.

Differing Views

The NLRB also received comments from:

• Tesla Inc., which highlighted standard contract terms that it said shouldn’t be considered evidence of joint employment;
• the Federation of American Hospitals, which argued that the board’s proposal doesn’t account for the unique position of health-care companies that “must operate under an extensive labyrinth of both federal and state regulations”;
• the Strategic Organizing Center, which said the joint employer plan would bolster the labor law rights of workers in sectors rife with subcontracting, including those who work for the small companies that deliver packages for Amazon.com Inc.;
• the Lawyers’ Committee for Civil Rights Under Law, which pointed out that Black and Latinx workers are overrepresented in temporary staffing work, a “particularly pernicious area where joint employment relationships frequently exist”;
• a coalition of Republican lawmakers, which asserted the NLRB exceeded its legal authority in crafting a proposed rule that goes beyond the common law; and
• a group of Democratic lawmakers, which said the proposed amendments are necessary to prevent corporations from using intermediaries to evade their legal obligations.

The NLRB will accept, until Dec. 21, replies to comments filed by the Dec. 7 deadline.