New Labor Rule Makes Business Owners Responsible For Workers They Didn’t Hire

The National Labor Relations Board’s (NLRB) new interpretation of the joint employer standard is undermining the ability of business owners to maintain control of their own business.

In a recent lawsuit, the NLRB determined that a California recycling facility – Brown-Ferris Industries – is a “joint employer” with a temporary employment agency providing the workers. This means that both Brown-Ferris Industries and the company hiring the workers are legally responsible for all the workers involved, even though Brown-Ferris Industries did not hire nor manage the workers.

Modified last summer, the NLRB overturned the 30 year-old standard defining entities as joint employers only if it exercised “direct and immediate” control over another company’s employees. Under the new interpretation, a business owner is considered a “joint employer” if he has the “potential”, “indirect”, or “unexercised” ability to exercise control. The purpose of the new interpretation is to strengthen unions by allowing workers from both the business and the third party to collectively unionize against the owner.

The NLRB’s interpretation will also have devastating effects for small business franchise owners who use a firm’s business model and brand, but own and manage the store themselves. The National Federation of Independent Business (NFIB) is asking the D.C. Court of Appeals to review the case arguing that the standard “is a major concern for small, independent businesses because it will create a severe disincentive to contract with smaller firms. No rational business owner is going to risk a hefty lawsuit for employees that they have not hired.”

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