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NLRB decision pushes ’employee’ debate

Kimberly Adams Aug 28, 2015

NLRB decision pushes ’employee’ debate

Kimberly Adams Aug 28, 2015

Businesses, labor unions and pretty much everybody in between is still trying to parse out what a big decision by the National Labor Relations Board is going to mean to them.

The board smoothed the way yesterday for subcontractors and maybe franchise workers to organize and negotiate not only with the companies they get their checks from, but also with the bigger companies that are contracting for their services in the first place. And this is just one of the things that’s changing these days, about what it means to be an “employee” and an “employer” in this American economy.

Franchising and subcontracting labor haven’t always been the norm. 

“You had a situation over the last three decades where there’s been an effort by many major employers to offload large segments of their operations,” says Dean Bakerthe co-director of the Center for Economic and Policy Research. “And part of that was no doubt for efficiency reasons.”

He says the other part was companies trying to avoid efforts by workers to unionize. Baker says that’s what the NLRB ruling is trying to target.

“We don’t want to create a situation where we create a whole set of labor laws, and then we tell companies, ‘But if you don’t want to follow those, just call people independent contractors and you’re cool,'” he says.

Over the past few decades, whole business models have built up around this system. And those, according to corporate lawyer Elizabeth Sigety of Fox Rothschild, have now been upended.

“It flies in the face of economic reality, business reality for franchised businesses,” she says. Franchises like fast-food restaurant are worried about what the decision means for them.

And there’s another trend here, too. Just as more business were using contractors, new technology made it easier for independent workers to connect with companies. Think online temp agencies or, more recently, Uber.  

Arun Sundararajan, a professor at New York University’s Stern School of Business and an expert on the digital sharing economy, says the way to protect employees isn’t by making everyone a traditional employee.

“Instead we should sort of translate … the rights that full-time employees have to a broader spectrum of the economy,” he says.

But the NLRB decision makes clear the board’s ready to change the system, saying in a statement that the current standard has failed to keep pace with the way people work. Diana Furchtgott-Roth of the Manhattan Institute thinks this decision is bad for U.S. businesses.

“So the NLRB decision actually fits in with some other guidelines and rules that the Labor Department has issued within the past couple of months,” she says.

Furchtgott-Roth says we should expect many legal challenges to this ruling.

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