A United States District Court in Texas has refused to dismiss a law suit challenging OSHA’s practice of allowing union representatives and organizers to serve as “employee representatives” in inspections of non-union worksites. If the Court ultimately sustains the plaintiff’s claims, unions will lose another often valuable organizing tool that has provided them with visibility and access to employees in connection with organizing campaigns.

The National Federation of Independent Business (‘NFIB”) filed suit to challenge an OSHA Standard Interpretation Letter (the “Letter”), which sets forth the agency’s position that an employee of a union that does not represent the workers at the site may accompany the OSHA representative conducting an inspection. The Federation argued on behalf of itself and one of its members because OSHA had permitted a representative of the Service Employees International Union (“SEIU”) to accompany him despite the fact the SEIU did not represent the workers at the facility. The lawsuit asserts that in allowing this, OSHA had violated its own rules and gave the union rights that it did not have under the law. In the Letter, issued in February 2013, OSHA gave a new definition of “reasonably necessary,” which supported its holding, for the first time, that a third party’s presence would be deemed “reasonably necessary,” if OSHA concluded that the presence of the third party “will make a positive contribution” to an effective inspection. The NFIB’s lawsuit contradicted both the OSHA statute itself and OSHA regulations issued in 1971 following formal rulemaking.

While OSHA asked the Court to dismiss the lawsuit, claiming that the NFIB lacked standing to bring the lawsuit because it could not demonstrate that it had been harmed, and that the lawsuit was procedurally flawed for a number of other reasons as well, Judge Sidney A. Fitzwater denied the U.S. Department of Labor’s Motion to Dismiss, finding that “NFIB as stated a claim upon which relief can be granted,” and that “the Letter flatly contradicts a prior legislative rule as to whether the employee representative” in such a walk-around inspection “must himself be an employee.”

The rule Judge Fitzwater referred to, 29 U.S.C Section 1903.8(c) contained OSHA’s policies for what are referred to as “safety walk-arounds,” which are on site workplace inspections. The Letter gives employees in the workplace the right to have a representative present during such an inspection. OSHA’s own rules make clear that such “authorized representative(s) shall be an employee(s) of the employer,” but that when “good cause is shown why accompaniment by a third party who is not an employee of the employer (such as an industrial hygienist or a safety engineer) is reasonably necessary to the conduct of an effective and thorough physical inspection of the workplace, such third party may accompany the Compliance Safety and Health Officer during the inspection.” (emphasis added)

If the ultimate outcome of the case, which seems likely, is a finding that OSHA does not have the authority to permit union representatives to participate in OSHA inspections of workplaces where they do not represent the workers, the effect would be to deny unions a potentially potent tool for organizing. As Judge Fitzwater described in his Memorandum and Order, unions such as the UAW in its ongoing organizing campaign at Nissan in Tennessee have come to rely upon participation in OSHA inspections as a valuable tool.

While it is too soon to say whether the Department of Labor will continue to defend the 2013 Letter and the position that OSHA has the right to permit union representatives to participate in safety and health inspections, Judge Fitzwater’s denial of the motion to dismiss raises serious doubt as to the long term viability of OSHA’s position.

In the waning days of the Obama Administration, the President’s appointed General Counsel to the NLRB took official action this week to permit questionable and disruptive strike activity, including one day strikes that are frequently used by aggressive unions against hospitals and other employers.  Specifically, the GC’s Office issued an Operations-Management Memorandum acknowledging unions and employees “are more frequently engaging in short-term strikes” and seeking to “clarify and modify the law regarding intermittent and partial strikes” to address concern employees face “potential discipline for activities that should be considered protected under Section 7 of the Act.”

The Memo seems to be a transparent attempt to push an agenda to protect the activities of certain unions, mainly in the health care, fast food, and retail industries, which have used multiple one-day strikes as a weapon.

Intermittent Strikes, Partial Strikes and Slowdown Are Not Permitted Under the NLRA

Under current National Labor Relations Act case law work slowdowns, partial strikes and intermittent strikes are not permitted, and therefore employees who engage in them are not protected and may potentially be disciplined or discharged.  The reason for this long standing policy is clear; while employees should be free to withhold their labor as economic leverage, they should not be able to do so without any risk or sacrifice.  For that reason, what the Board has historically referred to as quasi-strikes which are “intentionally planned and coordinated so as to effectively reap the benefit of a continuous strike action without assuming the economic risks associated with a continuous forthright strike, i.e., loss of wages and possible replacement,” have not been entitled to protection under the Act.  WestPac Electric, 321 NLRB 1322, 1360 (1996).

While this principle is sound and well established, its exact contours lack clarity.  While work slowdowns, partial day strikes or work stoppages refusing to do a certain type of work (overtime, weekend, etc.)  fall clearly outside the protection of the Act, to date Board law has been less clear on strikes lasting at least one day, even if repeated in nature.  While most recognize that an announced strategy of multiple one day strikes would be problematic as would many one day strikes, there has been less clarity on how many is many, with many believing two to three one day strikes could be protected but more than that likely loses protection.

Unions Increasingly Use Intermittent and Short Strikes to Improperly Gain Bargaining Leverage

In recent years , taking advantage of the lack of clarity, the California Nurses Association, SEIU, and other unions have used one day strikes against hospitals as a way to force the target hospital to spend millions of dollars in replacement workers and other preparations to ensure proper care for their sick patients while not really impacting the wages of the nurses or other healthcare workers who only lose a day or two of pay.  Similarly, the UFCW, “Fight for 15” and other organizations have used flash strikes or other short term walkouts (often during holidays or other peak times) to obtain publicity and disrupt the operations of fast food restaurants, Wal-Mart and others, without significant or even any loss of wages.

In the case of a hospital, these strikes typically take the form of a strike notice under 8(g) of the Act telling the hospital that the employees will be on strike for a single 24 hour period together with an unconditionally offer to return to work as the end of that period.  This forces the hospital to scramble to find qualified temporary replacement workers, vet them, train them and orient them.  In order to do so, the hospital typically needs to contract with the replacement workers for at least five days and at significant expense.  Once the strike is over, often nothing has been resolved and the parties go back to the table only for the union to threaten to engage in another intermittent strike sometime down the line.

The only saving grace was that unions were hesitant to call more than two or three of these short strikes during any single labor dispute/negotiation because of the lack of clarity noted above left them vulnerable to a claim that the third or fourth short strike was intermittent and unprotected.

GC Seeks an Exception

In acknowledging both the increase of these union tactics and the lack of clear guidance on them, the GC’s Memorandum instructs the NLRB’s Regions to take action to again put their thumb on the scales in favor of unions.  Specifically, the GC Memorandum provided and instructed Regions to utilize an Intermittent Strike Brief Insert that advocates for a loosing of the standard to sanction any intermittent or short time strikes which:

  1. “involve a complete cessation of work [as opposed to a slow down or partial work stoppage];
  2. “are not designed to impose permanent conditions of work [i.e., weekend only strikes, refusal to work overtime, etc.], but rather are designed to exert economic pressure; and
  3. The employer is made aware of the employees’ purpose in striking.”

While, if accepted by the Board and the courts, this certainly would provide some clarity, that clarity would be that unions would be free to conduct as many short, intermittent strikes as they desired so long as they called for a complete walkout and they old the employer what they were seeking.  This would not only sanction the damaging work stoppage above, but would result in increased and expanded use/abuse of such tactics.

Management Missive

Employers must be aware of this development, as well as the fact unions likely will be looking to test this theory, and should prepare accordingly.  While certainly contingency planning is a must, employers may also be able to take advantage of certain bargaining strategies designed to mitigate the impact of these union tactics.  Employers should consult with experienced labor counsel to ensure they are prepared.


Hoagie Sandwich and ChipsThis past week, Doctor’s Associates Inc., which is the owner and franchisor for the Subway sandwich restaurant chain entered into a Voluntary Agreement (the “Agreement”) with the US Department of Labor’s (DOL) Wage and Hour Division “as part of [Subway’s] broader efforts to make its franchised restaurants and overall business operations socially responsible,” and as part of Subway’s “effort to promote and achieve compliance with labor standards to protect and enhance the welfare” of Subway’s own workforce and that of its franchisees.

While the Agreement appears intended to help reduce the number of wage and hour law claims arising at both Subway’s company owned stores and those operated by its franchisee across the country, the Agreement appears to add further support to efforts by unions, plaintiffs’ lawyers and other federal and state agencies such as the National Labor Relations Board (NLRB or Board), DOL’s own Occupational Safety and Health Administration (OSHA) and the EEOC to treat franchisors as joint employers with their franchisees.

What Is in the Agreement?

While on its face this may sound like a good idea and one that should not be controversial, in reality by entering into this Agreement, which among other things commits Subway to working with both the DOL and Subway’s franchisees, to develop and disseminate wage and hour compliance assistance materials and to work directly with the DOL to “explore ways to use technology to support franchisee compliance, such as building alerts into a payroll and scheduling platform that SUBWAY offers as a service to its franchisees,” and although the Agreement is notable for its silence on the question of whether the DOL considers Subway to be a joint employer with its franchisees, the Agreement is likely to be cited, by unions, plaintiffs’ lawyers and other government agencies such as the NLRB as evidence of the fact that Subway as franchisor possesses the ability, whether exercised or not, to directly or indirectly affect the terms and conditions of employment of its franchisees’ employees, and as such should be found to be a joint employer with them.

Notably, while the Agreement does not specifically address the exercise of any such authority on a day to day basis, it does suggest an ongoing monitoring, investigation and compliance role in franchisee operations and employment practices by Subway and a commitment by Subway as franchisor to take action and provide data to the DOL concerning Fair Labor Standards Act compliance.  In the past, courts have in reliance on similar factors held that a franchisor could be liable with its franchisees for overtime, minimum wage and similar wage and hour violations.

Of particular interest to many will be the final section of the Agreement, titled “Emphasizing consequences for FLSA noncompliance.”  This section not only notes that “SUBWAY requires franchisees to comply with all applicable laws, including the FLSA, as part of its franchise agreement,” but also what action it may take where it finds a franchisee has a “history of FLSA violations”:

SUBWAY may exercise its business judgment to terminate an existing franchise, deny a franchisee the opportunity to purchase additional franchises, or otherwise discipline a franchisee based on a franchisee’s history of FLSA violations.

Will Subway’s “Voluntary Agreement” with the DOL Have Any Impact Beyond Wage and Hour Matters?

As we approach the one year anniversary of the NLRB’s decision in Browning Ferris Industries, it is abundantly clear that not only the Board itself but unions and others seeking to represent and act on behalf of employees are continuing to push the boundaries and expand the application of Browning Ferris.  In fact the Board has been asked to find that policies and standards such as those evidencing a business’s commitment to “socially responsible” employment practices, the very phrase used in the Subway-DOL Agreement, should be evidence of indirect control sufficient to support a finding of a joint employer relationship between a business and its suppliers.

Moreover, the NLRB and unions such as UNITE HERE and the Service Employees International Union continue to aggressively pursue their argument that the terms of a franchise agreement and a franchisor’s efforts to ensure that its franchisees, who conduct business under its brand, can also be sufficient to support a finding of joint employer status.  No doubt they will also point to the Subway Agreement with the DOL as also being evidence of such direct or indirect control affecting franchisees’ employees’ terms and conditions.

What Should Employers Do Now?

Employers are well advised to review the full range of their operations and personnel decisions, including their use of contingent and temporaries and personnel supplied by temporary and other staffing agencies to assess their vulnerability to such action and to determine what steps they make take to better position themselves for the challenges that are surely coming.

Equally critical employers should carefully evaluate their relationships with suppliers, licensees, and others they do business with to ensure that their relationships, and the agreements, both written and verbal, governing those relationships do not create additional and avoidable risks.

NLRB Curtails Employers’ Right to Hire Permanent Replacements for Strikers – Bolsters Unions’ Ability to Use Intermittent Strikes

The National Labor Relations Board, in a 2-1 decision by Chairman Mark Pearce and Member Kent Hirozawa, in American Baptist Homes of the West, 364 NLRB No. 13, has adopted a new standard for considering the legality of an employer’s hiring of permanent replacements in response to economic strikes. The decision, in the words of Member Philip Miscimarra’s dissent, is not only a “deformation of Board precedent,” but “a substantial rearrangement of the competing interests balanced by Congress when it chose to protect various economic weapons, including the hiring of permanent replacements.”

The Board Has Curtailed the Right to Hire Permanent Striker Replacements

In short, the Board in American Baptist Home of the West, severely casts doubt on the right of an employer to hire permanent replacements for striking workers. Under longstanding precedents, the Board would not look into the motivation when an employer decided to hire permanent replacements for strikers.

In this case, the General Counsel asked the Board to adopt a new standard and to hold that an employer may not hire permanent replacements where the Board finds that the employer has “an intent to encroach upon protected rights,” namely the right to strike.  The Board has now held, for the first time, that it will find an employer’s hiring of permanent replacements to be an unfair labor practice where it concludes “the hiring of permanent replacements was motivated by a purpose prohibited by the Act,” and that it will no longer require proof that of “the existence of an unlawful purpose extrinsic to the strike.”

The Board Holds That Attempts to Discourage Future Strikes Unlawfully Interferes with Employees’ Section 7 Rights

In the case at issue, the Board majority found that a prohibited purpose existed based on statements by an employer who had been subjected to a series of intermittent strikes that had caused it to incur significant expense in arranging for temporary replacements and wanted to “avoid any future strikes” and “teach the strikers and the Union a lesson.”

In so doing, the Board has undercut the right of employers, well recognized for almost 80 years, to hire permanent replacements as an “economic weapon” when faced with an economic strike, labor’s ultimate economic weapon. Relying on an obscure phrase in the Board’s 1961 decision in Hot Shoppes, Inc.,  a decision in which as Member Miscimarra points out, “the Board adopted a rule disallowing any scrutiny into an employer’s motive for hiring permanent replacements” in response to an economic strike (emphasis in original).

The Supreme Court Has Recognized Employers’ Right Since 1938

Since the Supreme Court’s 1938 decision in National Labor Relations Board v. McKay Radio & Telegraph Co., 304 U.S. 333, it has been undisputed that an employer faced with an economic strike by its employees has had the right to hire permanent replacements to continue the operation of its business and to respond to the union’s use of labor’s ultimate economic weapon. Notably, the Board and the Courts have viewed labor’s right to strike and an employer’s right to hire replacements or lock out employees as countervailing forces, and that employers and unions in collective bargaining “proceed from contrary and to an extent antagonistic viewpoints and concepts of self-interest” and that the “presence of economic weapons in reserve, and their actual exercise on occasion by the parties, is part and parcel of the system that the Wagner and Taft-Hartley Acts have recognized.” NLRB v. Insurance Agents’ International Union, 361 U.S. 477, 478-479 (1960).

In other words, our system of labor management relations and collective bargaining has historically granted labor and management tools that they have had a legal right to threatened to wield or to actually use to help prevail in bargaining.   This has been a fundamental element of the system of collective bargaining in the United States since the NLRA was enacted in 1935.

The Board Is Attempting to Change Bargaining by Cutting Employers’ Rights

The unfair labor practice charges that the Board considered in American Baptist Homes of the West arose out of contract negotiations between the operator of a continuing care facility in Oakland, CA, and Service Employees International Union, United Healthcare Workers-West (SEIU) in 2010 for a successor collective bargaining Agreement. In order to press its bargaining demands, the SEIU engaged in informational picketing of the employer’s facilities.  In order to ramp up the pressure, on July 9, 2010, the SEIU then gave the employer notice that it would strike on Monday August 2nd if there was not a new contract.  The SEIU also notified the employer that same day, in a second letter, that the strikers would return to work on Saturday August 7th.  In other words the union threatened to conduct an “intermittent strike,” something that has become a common tool, particularly in health care.  The website Labor Notes  stated as follows concerning this tactic: “A short-term strike sends a powerful message to management, dramatizing workers’ anger and determination.”

Faced with the need to maintain operations and care for its patients, the employer engaged a staffing agency and incurred expenses of at least $350,000 to ensure that the necessary personnel would be available.  When the union struck, the employer made offers of permanent employment to 44 of the replacements for the 80 employees who went on strike.

The Board, in finding that the employer in Baptist Home of the West did not have the right in these circumstances to hire permanent replacements pointed to evidence that “the decision to hire permanent replacements was admittedly motivated by her desire to avoid a future strike at the facility,” and the Board’s finding that it would have cost the employer a “lesser amount  . . . over the 3-year life of the contract to fully implement the Union’s” economic proposals than it cost to retain the replacements.

In essence, the Board concluded that what made the hiring of permanent understudies a ULP and unlawful in this case was that the employer was seeking to dissuade employees from striking in the future.  However, what the majority ignores is that every time an employer and a union bargain for a contract, at the end of the day each side tries to convince the other to compromise through the threat of wielding the rights the law gives them: the right to strike and the right to hire replacements and/or lock out employees.

What Does This Mean for Employers Going Forward?

There can be no question that the Board and the General Counsel are trying to affect the relative strength of employers and unions in bargaining.  For those who read this blog and follow the pronouncements of the Board’s General Counsel, this should come as no surprise.  As we reported in April, when the General Counsel issued his latest memo identifying issues on which the NLRB’s Regional Offices must consult with the Division of Advice, cases involving an allegation that an employer’s permanent replacement of economic strikers had an unlawful motive, were near the top of the list.

While the views of the Board and the General Counsel are reflected in American Baptist Homes of the West, as the dissent observes, the decision is clearly inconsistent with almost 80 years of judicial and Board interpretation of the Act.  Undoubtedly, the issue will make its way back into the courts as the Board seeks to enforce the decision and this and/or other employers and advocates seek judicial review.

While at the end of the day, the Courts are likely to restore the longstanding interpretation of the Act which has held that as the Board held in Mrs. Natt’s Bakery in 1942, “since an employer may” when faced with the prospect of an economic strike “replace striking workers with impunity, it is not unlawful for him to state such an intention.”

In the meantime, employers facing strike threats and considering when and whether to hire permanent replacements, will no doubt face unions and workers that will feel an unwarranted sense of protection against the possibility of their employers wielding this rarely deployed tool.

The National Labor Relations Board (“NLRB”) unfair labor practice hearing  against McDonald’s, USA, LLC (“McDonald’s) and numerous franchisees opened in New York City on Monday March 30, 2015, before Administrative Law Judge (“ALJ”) Lauren Esposito. (“ALJ”), a former NLRB field attorney and union lawyer. Also this week, the Service Employees International Union (“SEIU”) announced that it was investing an additional Fifteen Million Dollars in the Fight For Fifteen campaign, which seeks to organize fast food workers nationwide and that a series of events would take place across the country on April 15th as part of that effort.

In the McDonald’s cases, under the terms of a Case Management Order issued by ALJ Esposito on March 3, 2015, the ULP hearings are scheduled to take place in three phases, with adjournments between each phase.  The hearing which began this week in Manhattan will start with the closely watched claims by the Board’s General Counsel that McDonald’s and its franchisees are joint employers.  The General Counsel will produce witnesses who will offer testimony and evidence on the nationwide joint employer issue and will continue with evidence of joint employer status and evidence on specific violations allegedly committed by the franchisees in New York and Philadelphia.  The hearing will then move to Chicago and will conclude in Los Angeles with the presentation of evidence of joint employer status and evidence regarding specific violations alleged to have occurred in the Midwest and California, respectively.

As we previously reported, on December 19, 2014, the General Counsel of the NLRB issued 13 Consolidated Complaints in Regional Offices across the country charging that McDonald’s and franchisees are joint employers and seeking to hold McDonald’s liable for unfair labor practices allegedly committed by its franchisees. The NLRB’s press release broadly outlined the basis for its decision to issue the Complaints:

“Our investigation found that McDonald’s, USA, LLC, through its franchise relationship and its use of tools, resources and technology, engages in sufficient control over its franchisees’ operations, beyond protection of the brand, to make it a putative joint employer with its franchisees, sharing liability for violations of our Act.  This finding is further supported by McDonald’s, USA, LLC’s nationwide response to franchise employee activities while participating in fast food worker protests to improve their wages and working conditions.”

As a result of the interest generated by these cases, the NLRB has created a separate webpage entitled “McDonald’s Fact Sheet” with links the Complaints and the docket of proceedings.

At recent public appearances, including at the section meeting of the American Bar Association’s Committee on Developments Under the National Labor Relations Act, General Counsel Griffin addressed the legal theories he relied upon in authorizing the issuance of the Complaints alleging joint-employer status.  He noted that it was the General Counsel’s position that the facts (he did not say which ones) would support a finding of joint-employer status under the Board’s existing legal standards and were not dependent upon the Board adopting a new standard such as the one the General Counsel advocated in the amicus brief filed in the still pending Browning Ferris case in which the Board is considering adopting a new more lenient standard for determining whether a joint-employer relationship.

The General Counsel’s  Consolidated Complaints each contain three identical bare bones allegations with respect to the claim that franchisor and franchisees are joint employers: -“(1) McDonald’s and its franchisees are parties to a franchise agreement, (2) McDonald’s possesses and/or exercised control over the labor relations policies of each franchisee, and (3) McDonald’s and the franchisees are joint employers.”

On January 5, 2015, the General Counsel transferred the cases from Regions 4, 13, 20, 25 and 31 to the Regional Director from Region 2.  On January 6, 2015, the Director of Region 2 issued an Order Consolidating the Consolidated Complaints from Regions 2, 4, 13, 20, 25 and 31 with the already-consolidated cases from Region 2, and set the March 30, 2015 hearing date.

McDonald’s filed its Answer to the Consolidated Complaints and a “Motion for a Bill of Particulars or, the alternative, Motion to Strike Joint Employer Allegations and Dismiss the Complaint” alleging that the General Counsel’s consolidated complaint failed to provide it with sufficient notice of the basis for the joint employer status in violation of fundamental due process, the Administrative Procedure Act, and the Board’s own internal manuals and guidelines.  The franchisees also filed similar answers.  The General Counsel opposed McDonald’s Motion for a Bill of Particulars, arguing that the allegation of a franchising relationship between McDonald’s and the franchisees provides sufficient notice of the allegations.  The ALJ denied McDonald’s motion.  McDonald’s also filed a Request For Special Appeal with the NLRB seeking permission to file an appeal to reverse the ALJ’ Order denying its Motion for a Bill of Particulars.  That too was denied.

McDonald’s also filed a “Motion To Sever” the Consolidated Complaints, to allow for separate hearings for the charges from the six regional offices that had been consolidated for trial in New York.  While the Board’s Rules and Regulations give the General Counsel discretion to consolidate cases the General Counsel’s discretion is not unlimited.  Where the cases involve different factual issues, different backgrounds and different complaints or legal theories, the Board has held that consolidation was not proper.  McDonald’s argued in these cases that consolidation is improper because the cases  consolidated in Region 2 involve 61 charges, and perhaps most importantly, 22 separate distinct and unrelated employers, as well as 181 unrelated allegations and 30 individual restaurants.  McDonald’s urged the judge to sever the complaints so that each individual franchisee will have his or her case heard by a separate Administrative Law Judge in the region where the case arose.

McDonald’s requested oral argument on its Motion to Sever. On February 11, 2015, the ALJ held a telephone conference with McDonald’s and all of the franchisees and their separate attorneys to address McDonald’s motion as well as scheduling issues.  Given the number of parties and significant issues involved, McDonald’s counsel requested that the teleconference be transcribed by a court reporter, which the ALJ denied.  Not surprisingly, the ALJ  denied McDonald’s Motion to Sever.

On March 3, 2015, the ALJ issued a Case Management Order which the General Counsel had requested.  The Order provides that the issue of whether McDonald’s can be held liable as a joint-employer for the unfair labor practices of its franchisees will be heard before trying the merits of the underlying unfair labor practice allegation.  The Order further requires McDonald’s to present its evidence on the joint employer status specific to a franchisee immediately after the General Counsel and the Charging Parties present their evidence specific to the franchisee which allows the General Counsel and Charging Party multiple opportunities to hear and respond to McDonald’s evidence before resting their cases.  McDonald’s filed a Request for Special Appeal seeking to reverse the ALJ’s Order, arguing that its alleged status as a joint-employer is a remedial issue that should be tried only after the General Counsel has proven the merits of the underlying charges against the franchisees alleged to have committed unfair labor practices and arguing that the sequence of trial unfairly allows the General Counsel and Charging Party a preview of McDonald’s case before they rest their cases.

The pressure on McDonald’s by organized labor extends beyond the NLRB proceedings.  This week the New York Times reported that the Service Employees International Union (“SEIU”) has pumped more than $15 million into the Fight for Fifteen movement which seeks to raise the wages at McDonald’s and other fast food restaurants and  retailers to a minimum of $15 per hour and helped persuade the NLRB to go after McDonald’s on a joint-employer theory.

In addition to their NLRB claims, workers at McDonald’s restaurants  in at least 19 cities have also filed workplace health and safety complaints with the Occupational Safety and Health Administration (“OSHA”), alleging that they had been injured and placed in danger on the job because of a lack of adequate training and protective equipment.

The SEIU has arranged for a coalition of European and American unions to accuse McDonald’s of improper tax practices.  Moreover, Organizers for the Fight for Fifteen will hold rallies in New York, Chicago and Los Angeles on April 15, 2015 in which they expect upwards of 10,000 protestors.

The McDonald’s case along with a pending NLRB case involving Browning-Ferris, are significant high stakes litigation which have the potential to fundamentally alter the way employers conduct business with franchisees and third-party contractors.  Last week, the U.S. Chamber of Commerce’s Workforce Freedom Initiative (WFI) issued a 40 page report, “Opportunity at Risk: A New Joint-Employer Standard and the Threat to Small Business.”  The report highlights the administration’s ongoing effort to redefine the concept of “joint-employment” relationships, and how these efforts “threaten to disrupt major sectors of the economy such as franchising and subcontracting.”   The report is essential reading for employers, attorneys and anyone else interested in what the impact would be on the economy and employer-employee relations if the legal standards for determining joint-employer status change in the way that the Board’s General Counsel and the SEIU and other unions are urging in the McDonald’s cases and elsewhere.

We will continue to monitor these case closely and keep you appraised of new developments.

Employers in the Technology Media and Telecommunications (“TMT”) industries have generally not thought that union organizing was an issue that affected their businesses and workforces.  Recent developments suggest that this is no longer the case.

These industries have earned reputations for innovative workplaces, generous benefits, and free food. At the same time, technology companies have outsourced many non-core functions such as campus security, maintenance, and transportation to third party suppliers.  Employees of these vendors  generally receive less generous compensation, benefits and perks than high tech employees. The different treatment of primary employees and ancillary workers employed by subcontractors has given rise to claims that the industry is divided into the “haves” and “have not’s” and provoked a rising backlash among many workers.

Unions have been using this discontent to increase  their  influence in the TMT industry. Facebook’s shuttle bus drivers voted to unionize this past November and ratified a first contract on February 21 of this year. On February 27th  shuttle bus drivers employed by a  contractor that provides shuttle services for Apple, eBay, Yahoo, and Zynga employees voted to be represented by the Teamsters. At the same time , the Service Employees International Union (“SEIU”), which has been actively organizing fast food workers nationwide, has been working to organize custodial employees and security guards of high tech companies in the Silicon Valley. Most of these organizing campaigns are focused on the employees of subcontractors retained by TMT companies, but that has not deterred unions from pressuring those companies directly.

At the same time, the SEIU and other unions have been urging the  National Labor Relations Board (“Board” or “NLRB”) to expand the definition of a joint employer under the National Labor Relations Act (“Act”). The Board’s General Counsel is actively supporting this effort and urging the Board to adopt a much broader “economic realities” test that would result in more frequent and expansive findings of joint employer relationships.  If the Board agrees, it will likely redefine the definition and could adopt a standard that would hold TMT companies to be joint employers with their cleaning, transportation and food service suppliers.

Currently, only entities which exercise direct control as opposed to “limited or routine” control are held to be  joint employers. The General Counsel is asking the Board to expand the definition to cover entities who exercise “indirect control over significant terms and conditions of employment of another entity’s employees.”[1] This could foist joint employer status on many TMT employers and directly involve them in their  contractors’ collective bargaining relationships.

The General Counsel’s proposed standard for determining joint employer status is “where, under the totality of the circumstances, including the way the separate entities have structured their commercial relationship, the putative joint employer wields sufficient influence over the working conditions of the other entity’s employees such that meaningful bargaining could not occur in its absence.”[2]

Organizing campaigns from the west and expanded joint employer liability from the east is poised to trap TMT employers in a perfect storm. TMT employers may be able to address these concerns by  structuring their agreements and relationships such that they  do not retain or exercise sufficient indicia of control over their subcontractors’ employees to support findings of  joint employer status even under the standard the General Counsel has urged the Board to adopt. The General Counsel has proposed a number of examples of control sufficient to trigger joint employer status including: (1) veto power over hiring or the right to reject the supplier firm’s employees; (2) retaining the contractual right to direct or supervise the contractor’s employees; (3) requiring employees to abide by the user firm’s rules; (4) dealing with employee grievance and personnel issues; (5) affecting employees’ work schedules or work hours; (6) affecting employee discipline; (7) making recommendations to the supplier firm during the collective-bargaining process or otherwise retaining the right to give such input; and (8) giving employees daily assignments.

Employers in the TMT industries and other areas should review what functions are performed by employees of subcontractors and how those employees are managed. Businesses should consider revising their agreements with supplier employers to remove terms which permit them to exercise control over the contractor’s employees in favor of terms which focus on the quality of the product the contractor is expected to deliver. By planning ahead, TMT employers either can or may reduce the risk of being found to be joint employer with their contractors’ employees.

[1] General Counsel’s Brief

[2] General Counsel’s Brief

NLRB General Counsel Richard Griffin announced on Tuesday July 29th   that he has authorized issuance of Unfair Labor Practice Complaints based on 43 of 181 charges pending against McDonald’s, USA, LLC and various of its franchisees, in which the Board will allege that the company and its franchisees are joint-employers. If the General Counsel prevails on his theory that McDonalds is a joint employer with its franchisees, the result would be not only a finding of shared responsibility for unfair labor practices, but could also mean that the franchisor would share in the responsibilities of collective bargaining if unions are successful in organizing franchisors’ workers.  The news, which comes as Fast Food Forward, which is affiliated with the Service Employees International Union (“SEIU”) wraps up its convention in Illinois.

In May of this  this year, General Counsel Griffin signaled his intent to ask the Board to revisit the standards for determining when and in what circumstances two or more employers could be found to be joint employers.  At that time the General Counsel invited the filing of amicus briefs in Browning-Ferris, the General Counsel asked interested parties to share their views on the following questions:

  • Should the Board adhere to its existing joint-employer standard or adopt a new standard?
  • What considerations should influence the Board’s decision in this regard?
  • And If the Board adopts a new standard for determining joint-employer status, what should that standard be?
  • If it involves the application of a multifactor test, what factors should be examined? What should be the basis or rationale for such a standard?

While submissions in Browning-Ferris on these questions were to be received by June 26, 2014, it would appear that the General Counsel has reached his decision that a new standard should be adopted and that it should be a much broader one than has been applied in the past.

Under the Board’s practices, the Advice Memorandum issued in the McDonald’s cases has not yet been made available to the public.  While the General Counsel has indicated that absent settlement in the 43 cases that he finds to have merit the Board’s regional directors are directed to issue unfair labor practice complaints and to try the cases before the Board’s Administrative Law Judges, it has been reported that McDonald’s will contest the matters, noting that it does not direct hirings, terminations or the setting of hours and wages by its franchisees and that it has never been found to be a joint employer with them in the past.

Adoption of a new standard for determining whether a joint employer relationship exists between companies in these and other circumstances, such as between companies and those to whom they outsource work and functions could have far broader implications beyond the franchise setting.

The New York Times reported today in its business section in article by Steven Greenhouse, who covers labor matters for the paper, about a convention taking place in Addison. The convention is underwritten by the Service Employees International Union or SEIU, which has been not very quietly backing the “Stand for Fifteen,” movement in its quest for wages of $15 per hour in the fast food field.  It is probably not a coincidence that Addison is just four miles from McDonald’s headquarters in Oak Brook, Il.

While most of last week’s focus in labor relations law was on the NLRB’s decision in Macy’s, finding a micro-unit consisting of just the cosmetics and fragrance sales employees at the chain’s Saugus MA store to be an appropriate unit for an NLRB election and collective bargaining, the Times article points to the other side of the coin:  the NLRB’s consideration of whether franchisees and franchisors are joint employers and/or common integrated enterprises. Such findings would likely increase the pressure on and more greatly involve franchisors in union organizing and other claims involving the employees of their franchisees.  With today’s Labor Board, it is a pretty safe bet that the NLRB will be finding more and more joint employer relationships to exist.

In a year marked by backlash against organized labor in traditional union strong holds such as Wisconsin, Ohio and Michigan, the Bureau of Labor Statistics has reported that union membership reached historic lows in 2012 as the result of that backlash along with other factors dwindled union ranks.

Organized labor lost 398,000 members in 2012 as the percentage of private sector union membership fell to an all time low of 6.6%. When both public and private sector employees are included the rate of union membership is almost doubled to 11.3% though that rate still represents a significant drop from the 11.8% represented in 2011. The rate of public sector union membership (35.9%) remained more than five times the rate of private sector union membership (6.6%), largely attributable to the lack of employee choice under many public sector organizing schemes and the influence unions have in electing their employers.

Although the number of employees represented by unions fell dramatically, certain sectors and areas were seemingly unaffected. Specifically, the percentage of healthcare employees actually increased from 9.3% to 9.6% as the total number of healthcare employees represented by unions rose by roughly 25,000 to 321,000. Similarly, the percentage of utility industry employees represented by unions increased and continues to lead all industries at 26.9%.

Geographically, California gained nearly 135,000 more union members and the rate of unionization increased from 18.2% to 18.4%. Though the raw numbers are less impressive, similar percentage increases were seen in the District of Columbia (9.9% to 10.3% ), Massachusetts (15.4% to 16.2%) and Texas (6.3 to 6.8). States that have traditionally been strong in union organizing – Illinois and New York, experienced a decrease.  Illinois dropped from 17.2% to 15.5% and New York dropped from 26.1% to 24.9%.

Although the causes of the overall drop in membership are myriad and include legislative change in several states as well as union organizers and resources diverted to electoral and other political causes, the effects are predictable… Organized labor must and will respond with aggressive efforts to increase their membership as a means of survival. The efforts will be both varied and targeted. 2013 will most certainly see concerted efforts to make it easier to organize through new NLRB regulations or rulings, increased use of corporate campaigns as well as traditional organizing drives focusing on the growing number of non-union service sector employees in the hospitality and healthcare industries. Likewise, in states like California with union friendly governors and legislatures, unions will inevitably continue to wield influence to aid their organizing efforts.

Management Missives

  • Although unions are down, they are far from out. Union free employers must be especially vigilant as organizing activities ramp up in 2013.
  • Although losing members in other industries, unions have had success in the healthcare and hospitality industries. The unions in these industries, especially the SIEU, CNA/NNU and UNITE-HERE, have already begun their aggressive organizing efforts, so employers in these industries should ensure they have a union avoidance program updated and in place as soon as possible.  Click here to learn  more about union organizing activities in the healthcare industry.
  • California employers should also examine whether their union avoidance program is adequate as the Golden State continues to be the goose that keeps on giving to the unions.

On January 3, 2013, the California Nurses Association/National Nurses United (CNA/NNU) and the National Union of Healthcare Workers (NUHW), two of the healthcare industry’s most aggressive unions, announced a new alliance designed to organize employees in non-union hospitals, impose their agenda on already unionized hospitals and target the members of rival union Service Employees International Union (SEIU).

CNA/NNU is the largest union exclusively representing registered nurses (RNs). The CNA has had considerable success in California organizing over 85,000 RNs and using its political clout to force through the first in the nation patient staffing ratios in 2004. The success emboldened CNA to expand nationally and create NNU, now representing an additional 100,000 RNs. CNA/NNU is known for extreme tactics, public pressure and strikes taken under the guise of patient care but with the actual goal of achieving typical labor objectives such as pay increases or union rights. In fact, CNA/NNU has called strikes at over 100 facilities in the last two years.

NUHW is a relatively new union, formed in 2009 by ousted leaders from the SEIU after the SEIU’s national leadership imposed control over the California local union covering healthcare workers. Since the schism, the NUHW leadership has embarked on an impressive campaign to poach SEIU members and otherwise organize healthcare workers. The NUHW already represents over 10,000 employees and has a pending NLRB petition to represent an additional 43,000 members currently represented by SEIU. NUHW is also known for aggressive tactics and is equally not shy about using strikes and other economic weapons to achieve its goals.

The announcement put an exclamation point on the official end of a four year truce between CNA/NNU and SEIU, under which the  two healthcare union giants had agreed to “bury the hatchet.” The formal truce, which was reached after the two unions publically attacked each other and sought to organize each other’s members in 2009, officially ended by its terms on December 31, 2012. The January 3rd announced alliance, which directly attacked SEIU and its leaders, makes it clear the hatchet has been dug up.

The alliance will provide both the CNA/NNU and NUHW additional resources to pursue their agendas. Since 2009 CNA/NNU has provided NUHW $2 million in loans or grants help the new union and the alliance will continue the financial support with NUHW’s access to CNA/NNU resources and CNA/NNU receiving per capita payments from NUHW members, the NUHW will remain technically an independent union. Additionally, the organizers, business representatives, lobbyists and other resources of each union can be utilized to support each other, not to mention the use of the membership to support picketing, strikes or other protest activity. The result is likely to be more hospital and healthcare organizing, more protests and more strikes in 2013

Management Missives

  • Non-union hospitals and other healthcare employers should evaluate their union avoidance strategies, appropriately train management and otherwise be prepared to respond it targeted;
  • Hospitals and other healthcare employers with relationships with either CNA/NNU and/or NUHW should anticipate an even more aggressive 2013, including potential organizing by the alliance of unrepresented areas of the employers’ operations, and develop appropriate contingent strategies;
  • Hospitals and other healthcare employers with SEIU contracts expiring in 2013 should be prepared for their facilities to become battlegrounds as CNA/NNU and NUHW look to capitalize on the alliance; and
  • The SEIU affiliated unions in healthcare are not likely to be passive and roll-over for the CNA/NNU and NUHW.   Expect the SEIU unions to develop and pursue aggressive counterstrategies to protect and expand their turf in this nasty street fight.