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New Ruling May Have Sweeping Implications For Fast Food, Other Industries
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New Ruling May Have Sweeping Implications For Fast Food, Other Industries

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New Ruling May Have Sweeping Implications For Fast Food, Other Industries

New Ruling May Have Sweeping Implications For Fast Food, Other Industries
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The National Labor Relations Board ruled Thursday that many corporations using a franchise model are "joint employers" with the local franchisee, which will impact union organizing and negotiations.

ARI SHAPIRO, HOST:

This afternoon, the National Labor Relations Board issued a long-awaited ruling that could affect a big part of the U.S. economy. The decision affects any company that franchises, like fast-food places, as well as any company that uses contractors. NPR's Yuki Noguchi is here to discuss it.

Yuki, welcome.

YUKI NOGUCHI, BYLINE: Thank you Ari.

SHAPIRO: Tell us exactly what this decision was.

NOGUCHI: Well, what the Labor Relations Board decided is that essentially a company and its contractor or franchisee are jointly responsible for employment terms and conditions. And what that means is that if a worker were to file a claim against a contractor or franchisee, it's not just filing against a contractor or franchisee, it's also filing against the parent company, which the NLRB sees as also legally responsible.

Now, unions like this decision because it makes it easier for them to approach parent companies or franchises like McDonald's or other fast food chains - or in fact, a variety of firms that use contractors or franchises - with collective bargaining agreements.

SHAPIRO: So suddenly the big fish could be in the crosshairs and not just the small ones.

NOGUCHI: Right.

SHAPIRO: We mentioned fast-food chains. Tell us what other kinds of industries and workers could be affected by this decision.

NOGUCHI: Well, very many is the short answer. If you think about all the industries where franchising and contracting or subcontracting is common, it's a very, very long list. It includes janitorial work, delivery truck drivers, construction workers, warehousing, home health care staffing agencies. This decision, in this case, involved a recycling company called Browning-Ferris.

SHAPIRO: And that was the company whose employees brought this initial claim, yeah.

NOGUCHI: Yes, although technically they were employees of a contractor, and that's the crux of the issue here. The contracting relationship has blurred the line of who the boss is. And the NLRB's decision here is clearly saying a contract does not shield the parent company from ultimate responsibility to workers downstream.

I spoke with Cathy Ruckleshaus, the general counsel at the National Employment Law Center, which advocates for workers, and she said this.

CATHY RUCKLESHAUS: The workers who are seeking to bargain with their employer now can sit down at the table with the two employers that are able to change the working conditions.

NOGUCHI: What she's saying here is that big corporations, like McDonald's, may wind up being forced to negotiate national labor agreements with unions. Until this decision, chains like that have used a franchise structure to shield themselves from such negotiations, which is why this is something the unions have been fighting over for a very long time. But, as you can imagine, collective bargaining would likely drive up the chains' labor costs, and they don't like that.

SHAPIRO: Well, what has the response been from business leaders?

NOGUCHI: It's clearly negative. They say that NLRB doesn't understand that a franchisee or contractor hires its own workers, creates its own terms of employment and supervises them. So it's a separate company, they argue, and the parent company should not be held responsible.

Smaller companies, the franchisees themselves, also dislike this decision. They say it robs them of the ability to make decisions about their day-to-day operations, and they say it will close-off a really important avenue for entrepreneurship.

SHAPIRO: Just briefly - is this the final word or is a legal challenge likely?

NOGUCHI: Well, given how broad the scope of business this affects, I would say it seems very likely.

SHAPIRO: That's NPR's Yuki Noguchi on an important ruling from the National Labor Relations Board.

Thanks Yuki.

NOGUCHI: Thank you Ari.

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