Dive Brief:

• The National Labor Relations Board Thursday voted 3-2 along party lines to revise its “joint employer” standard. The standard affects franchise workers and temporary workers that are employees of staffing agencies but work for other companies.

• The ruling came in a specific case, where waste management company Browning-Ferris Industries of California hired contractor firm Leadpoint Business Services to staff its recycling center. A Teamsters local union, the Sanitary Truck Drivers and Helpers Local 350, had asked the NLRB to rule that both companies are joint employers, and the agency’s agreement could have an immediate impact on another case before the board involving McDonald’s franchises.

• That the ruling also significantly changes the standard to shared responsibility of a parent company or contracting company from what the NLRB employed for some 30 years will likely also have an even wider effect on businesses in several industries. The ruling is expected to be challenged in the courts.

Dive Insight:

In recent decades, the NLRB worked from the notion that a staffing agency or franchise—the entities directly hiring workers—were the ones responsible for hiring policies like wages, benefits, and other points of negotiation between employee and employer. That left the parent company, like a fast-food company or a firm hiring temps from a staffing agency, out of the mix, above most controversies and worker complaints or requests.

But the use of temporary workers has increased substantially in the recent decades as well, including in retail and fast-food chains. These workers are left without much recourse, as their direct employers claim no ability to assess their work because they don’t supervise or have direct contact with workers, yet the companies they work for say that it’s the direct employer or parent company that dictates policies.

So in many ways, this is an adjustment to today’s reality. 

“Our aim today is to put the board’s joint-employer standard on a clearer and stronger analytical foundation, and, within the limits set out by the act, to best serve the federal policy of ‘encouraging the practice and procedure of collective bargaining,’” the three Democrats on the panel said in a statement.

Many businesses vowed to fight the ruling. The National Retail Federation released a statement through its National Council of Chain Restaurants, arguing that the ruling will hurt franchise owners.

“Chain restaurants are mostly small business franchisees that operate independent restaurants in local communities around the country,” said the division’s executive director, Rob Green. “The NLRB is effectively telling these small business owners that their personal business investments and the details of how they run their restaurants don’t matter. This unilateral decision by the NLRB is contrary to the realities of the 21st century economy and American free enterprise.”  

Some opposing the ruling said it violated centuries of precedent, noting that Ben Franklin is thought by some to be the first “franchisee,” while others argued it hurt today’s employment landscape. 

But the pendulum in recent years appears to be moving, at least somewhat, in workers’ favor. Several jurisdictions and even retailers have tackled minimum wage laws and working conditions, in an effort to improve the lot of many hourly workers, whom many economists say have largely missed the booms of recent years, including the current economic recovery.