It’s been a record year for labor strikes. Hollywood actors recently ended their historic, 118-day walkout. Thousands of auto workers in Detroit are returning to factories after more than 46 days on the picket lines. Their labor unions secured major gains during contract negotiations at a time when companies are struggling to find job candidates.
In December, some of the nation’s lowest paid workers will also gain the power to bargain with America’s largest corporations. Fast food employees, hotel housekeepers and millions of franchise workers are among those expected to benefit from a wonky new federal rule that will make it easier for them to form labor unions.
The National Labor Relations Board recently changed its standard in deciding when two companies are considered joint employers under the National Labor Relations Act, a federal law that grants workers the right to organize. The independent federal agency scrapped a Trump-era rule that was less likely to consider certain corporations joint employers, therefore allowing them to evade responsibility for unfair labor practices and avoid bargaining with union members at their franchisees and staffing firms. McDonald’s is among the companies that have successfully fought such accountability.
The new rule, approved in October, states that a company is considered a joint employer — and is therefore required to bargain with unionized employees — if it directly or indirectly controls any essential working condition: wages, work schedules, job assignments, disciplinary action, job supervision, hiring and firing and workplace safety conditions. Before, only companies with direct control were considered joint employers.
This change will expand the number of companies that must take part in labor negotiations along with their franchisees or independent contractors. That means the labor board may require Amazon to negotiate with delivery drivers hired by independent contractors. Or it could force major hospitals to bargain with subcontracted staff, such as physicians’ assistants, cafeteria workers and janitorial staff.
Big businesses and franchisees are furious. Low-paid workers and labor unions are thrilled. That tension was clear when the labor board released a draft of its controversial changes in September 2022: the agency was flooded with more than 13,000 public comments.
Richard Eiker, a fast food worker from Kansas City, Missouri, said that McDonald’s controls nearly every aspect of his job, even though the restaurant is owned by a franchisee. McDonald’s requires them to use specific software to track his productivity, for example, and decides whom he should call when the ice cream machine breaks. His restaurant has changed ownership six times, he wrote to the NLRB.
“Regardless of these ownership changes, my coworkers and I are expected to follow the same rules and maintain the same standards set by McDonald’s corporate, all while losing seniority and access to healthcare benefits with a new employer on our checks,” wrote Eiker, who is a leader in the pro-union group Stand Up KC.
“If McDonald’s can control nearly every aspect of my job, they can and should be held responsible for the maintenance of my benefits and working conditions,” he added.
McDonald’s disagrees. An attorney representing the company wrote a scathing letter to the Board, saying the new rule will “destroy the franchise model” and devastate small business owners who run their own restaurants.
“Franchisees … fear the proposed rule would curtail their independence, transforming owners and operators into middle managers contrary to the franchise model,” wrote Angela Steele, U.S. general counsel for McDonald’s. About 95% of McDonald’s restaurants are independently owned, according to the company.
Outsourcing responsibility
Some of America’s lowest paid workers have struggled to organize in recent years because of what is known as the “fissured” workplace. Rather than have a large number of direct employees working for a single company, U.S. corporations have increasingly evaded liability through a broad network of contracting, outsourcing, franchising and ownership structures.
The restaurant industry is a good example of this. It employs the largest number of minimum-wage workers, and relies heavily on the franchise model. More than 8 million people work for U.S. franchisees, which includes many retail outlets and hotels, according to the International Franchise Association.
Most restaurant workers are low paid, and their job has one of the nation’s lowest union membership rates — 3.6% in 2022.
That’s not a coincidence. Union membership, overall, leads to higher pay. Back in the 1950s, about one in three workers belonged to a labor union. Now it’s one in 10. That decline is partly responsible for growing income inequality in the U.S., research shows. Union workers earn 10% to 15% more than non-union employees with similar jobs and experience, according to an economist at the U.S. Department of Treasury.
The recent small change in wording to the joint-employer rule will likely make it far easier for restaurant workers to unionize.
The U.S. Chamber of Commerce described the labor board as “out-of-control” and filed a lawsuit Thursday in a Texas federal court challenging the policy. The business group’s vice president of labor policy accused the NLRB of caving to labor unions to “promote unionization at all costs, even when harmful to workers, employers and our economy.”
Redefining accountability
The latest joint-employer rule is not all that new. It was the standard during the Obama administration. In 2015, the NLRB ruled that waste management company Browning-Ferris Industries was a joint employer of contract workers who sorted its recycling because it had authority over their working conditions. The company sued, but a federal court upheld the labor board’s decision.
Then, during the Trump administration, the Republican-controlled labor board narrowed the definition of a joint employer. Companies were considered a joint employer only if they had “substantial direct and immediate control” over working conditions.
The new rule, approved by the Democrat-controlled labor board, essentially reinstates the older one. Though it only applies to labor relations, the U.S. Department of Labor recently adopted a similar definition of joint employer when determining which companies are liable for wage theft, sexual harassment, discrimination and safety violations on the job, for example.
That change became effective in September 2021. The NLRB’s new standard goes into effect on December 26.
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