Editorial: The NLRB closes a labor loophole

Labor advocates have long complained about companies evading their responsibilities as employers by outsourcing essential work to contractors, which they then require to hire and manage employees almost as if they worked for the company directly. The National Labor Relations Board pushed back against the practice in a ruling last month that is likely to result in more companies being treated as joint employers of contracted employees, and thus partly responsible under federal law for correcting labor violations and negotiating union contracts.

With that, the NLRB in effect ended three decades of narrow, work-site-specific decisions and returned to a broader pre-Reagan administration standard. Business and franchise groups complain that this portends the end of their world, but it shouldn’t — and the board should make sure it doesn’t. If the ruling works as intended, it will simply make it harder for companies to exploit the contractor system to keep labor costs down. There is a legitimate place in the economy for contracting firms and franchisers, but not when companies use them to circumvent workplace liabilities and responsibilities, or block union organizing.

The ruling came in a complaint filed against Browning-Ferris Industries of California and Leadpoint Business Services, a contractor that supplies sorters, screen cleaners and housekeepers for a Browning-Ferris recycling facility in Milpitas. The Teamsters sought to have both firms identified as joint employers of Leadpoint’s contract workers, who held a unionization vote last year. An NLRB regional director disagreed, but the full board ruled 3 to 2 that Browning-Ferris was a joint employer because it set staffing levels and standards for the Leadpoint workers, assigned them specific tasks and capped their wages at the level the firm paid its regular employees for similar work.

In broadening its test for determining a joint employer, the board said its rulings under the previous test had been “increasingly out of step with changing economic circumstances, particularly the recent dramatic growth in contingent employment relationships.” Those rulings created opportunities for companies to retain control, even indirectly, over workers without having to fulfill the duties of an employer. For example, the cap Browning-Ferris set on Leadpoint’s wages made it impossible for those workers to bargain for higher pay as long as Leadpoint was the only one at the negotiating table.

Critics and dissenting board members said the ruling was too vague in defining when a company or franchiser might be deemed a joint employer, and they’re right that it introduces uncomfortable new uncertainties. But the NLRB has to adapt to the changing labor market if federal labor protections are to remain meaningful. Companies that want to micromanage the workers employed by their subcontractors and franchisees are on notice now that retaining that kind of control means retaining some of the responsibilities as well.

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