Latest Union Power Grab

MOBILE, Ala. — A federal agency in charge of overseeing labor union elections is poised to radically alter the relationship between corporations and the small business owners who purchase franchises. It’s a move critics contend will reduce flexibility and kill jobs.

The little-noticed case is before the National Labor Relations Board. The agency’s general counsel has recommended the board redefine companies and their franchisees as joint employers. Such a move could dramatically increase the power of labor unions and reduce the autonomy of franchise owners to run their own businesses, according to critics of the move.

“It’s almost a blank check to the NLRB.”

Marcel Debruge, a labor law lawyer for the Birmingham, Ala., firm of Burr & Foreman, testified at a congressional hearing that the expected decision by the labor board could apply far beyond the nation’s 780,000 franchise businesses. It also could affect companies that provide contract labor to manufacturing companies and other firms.

“It’s almost a blank check to the NLRB,” he said.

The House Subcommittee on Health, Employment, Labor and Pensions held the “field hearing” in Mobile as part of an effort to bring Congress to the nation. The subcommittee’s chairman, Rep. Phil Roe, R-Tenn., presided over the hearing along with Rep. Bradley Byrne, a Republican who represents southwest Alabama.

Since a pair of rulings in 1984, the NLRB has treated two companies as joint employers if both exercise a significant degree of control over the same employees. The board’s general counsel has recommended in a case involving Houston waste management company Browning-Ferris Industries that the definition of joint employer be expanded.

A labor union has asked that Browning-Ferris be considered a joint employer with Leadpoint, a California recycling company. A regional director of the labor board sided with the companies in August 2013. An administrative law judge is expected to rule within the next week or two. An appeal would be heard by the board, which is controlled by appointees of President Barack Obama.

“That issue is an effort by a handful of unelected bureaucrats in Washington who are trying to fundamentally change the way franchise businesses operate.”

Supporters of a more expansive definition argue that the change is needed in an era when companies increasingly rely on employees from other companies for labor. Those employees work side by side with regular workers, often for less pay and fewer benefits.

But Roe said making such changes is the job of Congress and that the labor board would be exceeding its authority to redefine the relationship between companies and their franchise owners.

“That issue is an effort by a handful of unelected bureaucrats in Washington who are trying to fundamentally change the way franchise businesses operate,” Roe said Tuesday.

‘Boggles My Mind’
Byrne said the change would hurt both franchisers and franchises.

“It truly boggles my mind that we’re even talking about changing the definition of joint employment,” he said. “Expanding the definition of joint employer increases the liability of doing business.”

Debruge said he believes the move is all about reversing the long decline of private-sector labor unions since World War II.

“The motivation is pretty clear — increase the number of people who pay union dues,” he said. “It’s (the board) almost dropped any pretense of being an arbiter, a referee.”

The dispute in the Browning-Ferris case is the latest in a series of flashpoints between the Obama administration and critics who see a radical reorientation of an agency created during the New Deal to mediate disputes between organized labor and management. Other areas of contention include:

• “Ambush elections.” Under Obama, the NLRB has reduced the amount of time before a unionization election from 38 days to 11 days, reducing a company’s ability to make its case to employees that union representation is not in their best interests.
• “Micro unions.” The board has allowed small groups of employees within a company to form unions, allowing them to bypass the normal requirement of getting a majority of the entire workforce to agree to unionize. Roe said that reduces flexibility and limits a company’s ability to cross-train workers for other tasks.
• Card check. Labor supporters have called for automatic certification of a union if a majority of workers sign a petition. Obama supports that change, which Roe said would eliminate elections and secret ballots.
• Recess appointments. After failing to win confirmation for three appointees, Obama used a provision allowing temporary appointment when the Senate is not in session to install three members of the National Labor Relations Board. The Supreme Court later ruled the appointments were invalid since the Senate was not actually in recess.
• Fast food working condition. The labor board’s general counsel, Michael Griffin, concluded last year that McDonald’s Corp. could be held responsible for working conditions at restaurants owned by franchisees.

“This NLRB is the most activist in history, since 1935,” Roe said.

Dream in Jeopardy 
Roe and Byrne heard Tuesday from a pair of franchise business owners who said they would be harmed if the NLRB adopts the new standard.

Chris Holmes, who owns CLH Development Inc. in Tallahassee, Florida, told the congressmen he started working in restaurants as a teenager and worked his way up to management. He said he took out a second mortgage, maxed out his credit cards, sold personal belongings and borrowed money from his parents so he could buy a Firehouse Subs franchise and fulfill his dream of owning his own business.

“I am here today because I believe that dream may be in jeopardy,” he said.

Holmes said the corporate leaders at Firehouse Subs would effectively make him a company agent if the NLRB changes its definition of joint employers.

“I do all of the hiring, all of the firing, and I set wage rates for my business,” he said. “Then they would have no choice but to be completely involved in those decision-making processes (after the change). … Instead of being a small businessman, I would virtually overnight become a manager for a large company.”

Steve Carey said he had a similar dream when he bought a CertaPro Painters franchise after a 30-year Air Force career. He said buying the franchise, which serves two counties in coastal Alabama, offered the best arrangement. CertaPro provides trademarks and logos, as well as some marketing and branding assistance. But it has no control over his day-to-day decisions.

Adopting the labor board’s proposed standard could jeopardize the ability to attract new industrial employers to the United States and put existing jobs at risk.

“I have the autonomy to run my business as I see fit, including on matters such as all staffing, labor costs, subcontractor selection, marketing and vendor relationships,” he said. “That’s what I bought into, not to be told what to do.”

Carey said he would not have signed the franchise agreement if he had been “handcuffed with a change of definitions.”

Debruge, the labor lawyer, testified at the hearing that a flexible workforce is crucial in competing with countries with far lower labor costs. He pointed out that the average salary and benefits for a Mexican autoworkers is $8 an hour, far less than their American counterparts. It therefore is vital to allow companies to contract for labor in a variety of ways — full time, part time, temporary and permanent — that allows them to remain nimble in the face the changing conditions.

Adopting the labor board’s proposed standard could jeopardize the ability to attract new industrial employers to the United States and put existing jobs at risk, Debruge said.

“A one-size-fits-all approach … is simply not realistic,” he said.

None of the subcommittee’s Democrats made the trip to Mobile for Tuesday’s hearing. But several suggested at a hearing last year that it is premature to react to a decision that has not yet been made. Byrne, the Alabama congressman, said it is not hard to predict the outcome.

“I know exactly what the labor board is going to do. (It) is going to do exactly what unions want it to do.”