Renewed Attention on an Old Legal Doctrine

by Reuben A. GuttmanGuttman practices law with Guttman, Buschner & Brooks PLLC 

A half century ago, in Boire v. Greyhound, 376 US 473 (1964), the United States Supreme Court opined that two or more employers could exist as “joint employers” for the purposes of labor relations. Elaborating on this joint employer doctrine, the United States Court of Appeals for the Third Circuit, in a case known as NLRB v. Browning-Ferris Industries of Pennsylvania, 691 F.2d 1117 (3rd Cir. 1982), held that “the joint employer concept recognizes that the business entities involved are in fact separate but that they share or codetermine those matters governing the essential terms and conditions of employment.”

The joint employer doctrine allows for the imposition of liability against entities that do not sign the employee’s paycheck and do not provide monetary benefits but – still – in other ways, exercise or share control over the terms and conditions of employment. Last month, this tiny gem of labor doctrine formed the basis of 13 complaints, encompassing 78 separate charges, brought by the General Counsel to the National Labor Relations Board against McDonald’s USA, LLC, and McDonald’s franchisees as “joint employers.”

The complaints allege that the respondents interfered with employees’ rights to engage in concerted-protected activity, that is, organize a labor union, and in some cases retaliated against employees for doing so. While the substantive allegations are to some degree routine, the use of the “joint employer” doctrine to impose liability on the parent company – albeit the entity that probably does not pay workers directly – is the more interesting part of the case. The issuance of a complaint by the NLRB General Counsel is not a finding of liability; it is the beginning of a process that will cause the case to proceed to trial before an Administrative Law Judge, review of any decision by the full NLRB, and perhaps a hearing before a United States Court of Appeals where the decision will be enforced or overturned. Whatever the outcome, renewed focus on the joint employer doctrine is important in an era where employment paradigms are so complex that a myriad of entities may play a role in decisions that impact individual workers.

The control over labor relations exercised by a franchisor over franchisees – as in the case of McDonald’s — may provide a set of facts to establish common law applicable to more attenuated or complex relationships. While the McDonald’s matter will only have immediate precedential value to cases brought under the National Labor Relations Act, the NLRB’s ultimate ruling may be useful in analyzing employment settings not directly regulated by US Labor Law.

One need only consider US retailers that manufacture their products in China, Bangladesh, Vietnam and India. When problems occur at the local workplaces, the retailors – back home – often hide behind the excuse that their products are manufactured by “independent” employers. But is this really the case? When these retailers – for marketing purposes – tout their strict oversight on production and thus quality, can they truly say that responsibilities for local labor conditions are outside their control? Is it really possible for Apple Computers to manufacture its products in Southern China and tout them as true Apple products but when labor problems arise say that they are really the product of an independent company that is responsible for labor conditions at the local level? And so to some degree the McDonald’s case asks the question: “is it really possible for a company to tout the uniform quality of its product and then maintain that it does not exercise at least some control over those at the front line of production who make the product?”

For its part, the NLRB’s remedial abilities are limited and it must go to court to enforce its orders. Other than requiring employers to post notices acknowledging a violation of the law and informing employees of their rights to engage in protected concerted activity, the most the NLRB can require is that employees be given back pay where the employer’s conduct has caused the loss of work or an employment opportunity.

Yet, any back pay award is often offset by compensation received by the employee if he or she were able to find substitute work. And for employees who cannot document their efforts to find new jobs, there is sometimes even a
presumption that they would have found work. The NLRB’s processes are also extremely slow and workers and their unions are not entitled to pursue relief if the General Counsel does not believe their allegations merit a “complaint.”

Against this backdrop, unions have claimed that employers routinely violate Federal Labor Law because the chances of being civilly prosecuted are small and if the General Counsel pursues and secures a remedy, the remedies are worth the price of an infraction which may have the impact of chilling a union organizing campaign. Of course these criticisms of the NLRB are not new and it is because of them that many unions have strategized about ways to protect workers and organise without resort to the NLRB. And so, as the NLRB nears its 80th Anniversary – it was established in 1935 – there are more than a few people who are contemplating its relevance. Curiously, with the pursuit of McDonald’s, all eyes are back on the Board not because any remedy will have a material impact on the hamburger chain’s bottom line, but because the ultimate remedy may provide some insight into the protection of those who are part of attenuated supply chains or complex employment paradigms.