(Reuters) - The National Labor Relations Board on Monday made it easier for companies that franchise their brands, such as McDonald’s Corp (MCD.N), to be held liable for labour law violations.
The U.S. board overturned its own recent decision limiting corporate liability on the grounds that one of its members, appointed by President Donald Trump, should not have taken part in the December ruling because he had a conflict of interest as the case involved his own former law firm.
Monday’s decision means the law reverts to an Obama-era precedent under which companies which franchise their brand names can be liable for workplace law violations that occur at independently owned businesses that merely rent the franchise.
The NLRB said William Emanuel, who joined the agency last year, should not have taken part in the December decision, which concerned Iowa construction company Hy-Brand Industrial Contractors Ltd, because it overturned a 2015 ruling in a case involving his former law firm.
Monday’s decision reinstates the 2015 ruling, concerning sanitation company Browning-Ferris Industries Inc, which had been heavily criticized by business groups for expanding the definition of “joint employment” under federal labour law.
Under the previous ruling, franchisors may be considered joint employers and required to bargain with unions or be held accountable for franchisees’ labour practices. Business groups have said that treating franchisors as employers could upend the franchise model.
Monday’s ruling was a temporary hurdle for the board, which has overruled several decisions made during the administration of Trump’s predecessor, Democrat Barack Obama.
Employers such as McDonald’s have tried to limit their legal liability for employment-related rulings involving franchisees. The restaurant operator is in talks to settle a major NLRB case claiming it is a joint employer of franchise workers nationwide.
In the December decision involving Iowa construction company Hy-Brand Industrial Contractors Ltd, the NLRB ruled 3-2 that companies are joint employers of contractors’ workers only when they have direct control over working conditions.
The earlier Browning-Ferris ruling, in contrast, said companies need only to exercise indirect control to be considered joint employers.
Emanuel’s former law firm Littler Mendel son, one of the world’s largest law firms specializing in labour law, represented a staffing company involved in the Browning-Ferris case.
In a Feb. 9 memo, the NLRB inspector general said that by taking part in the Hy-Brand decision, Emanuel may have violated an executive order prohibiting presidential appointees from handling matters involving former employers or clients for two years after taking office.
Its move also comes after some Democrats in Congress, including Massachusetts Senator Elizabeth Warren, raised concerns about Emanuel’s involvement.
Trey Kovacs, a labour policy expert with the conservative Competitive Enterprise Institute, said Monday’s development underscored the need for Congress to narrow the definition of joint employment under federal law.
“Without a permanent legislative fix, the overly broad and vague Obama-era Browning-Ferris joint employer standard is once again a threat to entrepreneurs and workers nationwide,” Kovacs said.
Reporting by Daniel Wiessner in Albany, New York; Editing by Jonathan Oatis