NLRB Joint-Employer Ruling Highlights How Regulations Harm Economic Growth

The power of federal agencies continues to expand every day with more and more regulations being passed and implemented.  With regulations flowing out of the Federal Communications Commission (FCC) and the Environmental Protection Agency (EPA), one federal agency that hasn’t been spotlighted as much is the National Labor Relations Board (NLRB).  But, don’t let their lack of publicity be misleading because the NLRB is currently waging a war against businesses.  Now, the courts must decide on a costly regulation that could change the definition of the term “employee” forever.

In August of 2015, by a vote of 3-2, the NLRB moved to hold the Houston-based waste management firm Browning-Ferris responsible for the treatment of contractors that were hired out of California through a staffing agency. The ruling declared Browning-Ferris should be considered a “joint employer” with Leadpoint Business Services, a Phoenix-based staffing agency. This decision ran contrary to decades-old precedent on what the traditional definition is for an employee.  Many have warned that it could (and would) have implications for small and large businesses in the future.

The NLRB determined that Browning-Ferris should be considered a “joint employer” with the staffing agency. As a result, Browning-Ferris would now be forced into collective bargaining negotiations with contractors and be held liable for labor violations committed against them. The power of this ruling however did not only apply to a single waste management company, it threw out decades-old precedent that allowed for creative and flexible contract agreements in the private sector.

Iain Murray, with the Competitive Enterprise Institute, summarized the ruling succinctly:

The NLRB has turned the clock back 30 years in American employment practices, which have seen massive growth in flexible, more autonomous business and employment arrangements—such as franchises, contracted work, suppliers, and so on.

This ongoing battle is just another in a string of decisions during the Obama presidency that have contributed to an unprecedented transformation in the nation’s labor laws. A report last year from the Competitive Enterprise Institute detailed the many ways that both the NLRB and the Department of Labor (DOL) have used regulations to impact a number of things in the workplace. These changes include not only the expanding definition of the word “employee,” but also changes in overtime rules and attempts to streamline the elimination of secret ballot elections in the workplace.

Sean Higgins of The Washington Examiner explained the concerns that the private sector had with the expansion of the joint-employer designation as it related to franchisees, months before the final decision on Browning-Ferris even came down:

Business groups are warning that a recent move by the National Labor Relations Board, the federal labor law enforcement agency, to expand the legal definition of a “joint employer” is likely to affect much more than just federal labor law.

The move could spur other federal agencies and civil courts to use a similarly broad standard for defining what an employer is in enforcing any law related to the workplace, such as the Occupational Safety and Health Act or equal opportunity laws.

The August 2015 ruling from the NLRB on Browning-Ferris is currently in front of the U.S. Court of Appeals for the D.C. Circuit and many in the private sector are voicing their opposition to what many believe to be yet another example of abusive regulatory overreach by a federal agency.  The expansion of the new rules by the NLRB are likely to be heard by the U.S. Supreme Court, but until the DC Circuit hands down a ruling it won’t be known for certain whether the Supreme Court will take up the case in the Fall of 2016 or Spring of 2017.

Last week a number of companies and organizations, including Microsoft and the National Retail Federation, filed briefs in the Brown-Ferris appeal.

Microsoft noted in their brief the praise they received from the Obama Administration for their business practices with contractors they employ. However, now the very practices that the White House applauded the tech giant for, are the very practices at risk due to the NLRB’s ruling in Brown-Ferris. If the ruling is upheld, it’s clear that many businesses simply won’t engage in hiring contractors anymore, which will harm the entire staffing industry.

What is clear to those in the private sector is that a bad ruling will do a great deal of harm to employers and businesses, harming their ability for growth. It would also wipe out the growing staffing industry.  Even though the case will eventually be decided by the Courts, Sen. Lamar Alexander (R-Tenn.) introduced legislation last fall to roll back NLRB’s ruling.

TPA urges Congress to use their role of both oversight and appropriations to make it clear to federal agencies like the NLRB, and many others, that expansive regulations decided on ideological votes must not be the new normal. “Independent agencies” should remain independent and resist the urge to carry out a White House agenda, from either side of the political aisle.