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A National Labor Relations Board ruling that could significantly change the relationship between companies and their subcontractors and between franchise operators and their franchisees has businesses in those industries scrambling to understand the ramifications.

The decision could threaten the business model of staffing agencies and other firms that provide their customers with temporary workers, business groups say.

“This is very disturbing to many of our members,” said Jack Mozloom, a spokesman for the National Federation of Independent Business. “If the ruling stands, it makes it likely that the reason to hire a subcontractor goes away. It takes away the financial advantages, and removes any regulatory or legal protections that a customer gets from hiring them.”

The labor board’s decision — a complex one that is likely to face legal challenges — focused on the relationship between a staffing agency, Leadpoint Business Services, and a customer, Browning-Ferris Industries of California, that hired Leadpoint to provide workers for a recycling facility that it operates. The board decided that Browning-Ferris exerted enough control over Leadpoint’s workers to qualify as a “joint employer,” opening the door for a union seeking to represent Leadpoint’s employees to also negotiate with Browning-Ferris.

That sent a chill through those in the temporary staffing industry. The labor board’s ruling is a narrow one that would come into play only if workers provided by subcontractors seek union representation — something fairly few have done. But it potentially opens companies that use such workers to the kinds of employer responsibilities and liabilities that they have historically avoided by outsourcing their staffing.

That is precisely the point, labor advocates say. Richard L. Trumka, the president of the A.F.L.-C.I.O., called the decision a landmark one that “can help bring workplace laws into the 21st century and reflect the true nature of today’s economy.”

The labor board’s action is in line with the view of the Obama administration that the rise of franchising, contracting and similar arrangements in recent decades has made it more likely that workers will be deprived of such protections as minimum wages, overtime pay and the right to unionize.

But the N.F.I.B. said that some of its members feared that customers would avoid working with staffing firms if the benefits of doing so were eroded. That has already happened to some degree in Massachusetts, which has some of the nation’s most restrictive laws governing which workers qualify as independent contractors, Mr. Mozloom says.

“A lot of our members there have complained to us that it’s almost impossible for them to get contracts outside of Massachusetts,” he said. “No other state will touch them. It points the way to what could happen here.”

Others in the industry are taking a more cautious view of the ruling’s implications. The American Staffing Association, a trade group, notes that the decision affects only workers who unionize — and it thinks few will do so.

“Prior board decisions that effectively made it easier for temporary workers to unionize did not demonstrably result in increased unionization,” Stephen C. Dwyer, general counsel for the American Staffing Association, said in a statement. “That largely remains the case today.”

The ruling also has ramifications for those in the franchise industry. The labor board is separately litigating a case against McDonald’s, holding it liable as a joint employer for the actions of some of its franchisees. By significantly expanding the list of actions that could qualify a company as a joint employer, the Browning-Ferris decision potentially could affect many franchise owners and their franchisees.

Franchised businesses like fast-food outlets, hair salons and automotive repair shops are run by independent owners who operate with varying degrees of autonomy from their parent brand. Those owners are concerned about the idea that the company that sold them the franchise might be considered a joint employer of the workers they view as being under their sole control.

Steve Carey, the owner of a CertaPro Painters franchise in Mobile, Ala., said he made all of his own hiring, firing and wage decisions.

“CertaPro has no role in the employment aspects of my business at all,” he said recently in testimony before a House committee. He thinks that if CertaPro were held liable as a joint employer for his business’s actions, the company would want to be more involved in his day-to-day operational decisions.

“My freedom and autonomy — the entire reason I wanted to own my own business — will vanish,” he said.

The vagueness of the labor board’s ruling is the hardest part for franchise operators and owners, industry representatives say.

The Browning-Ferris ruling does not go into detail about how the labor board expects it to affect franchises, and the board’s decisions on McDonald’s have not given the specifics lawyers would like, regarding what precise actions might result in a joint-employer ruling.

In another recent franchise case, the N.L.R.B. decided that the salad chain Freshii did not exert enough control over one of its franchisees to be considered a joint employer. Two factors the board cited in its decision were that Freshii provided its franchisees with an employee handbook but did not require them to use it, and it did not require all of its operators to use identical computer software for ringing up sales.

Franchise owners and operators are struggling to figure out if the labor board will view them more as a McDonald’s or as a Freshii.

“We have people today who don’t know if they are an employer or not,” said Robert Cresanti, the executive vice president for government relations at the International Franchise Association. “You could pay 100 lawyers to sit for hours and opine, and they would only be guessing. There’s no bright line any more.”

More rulings, and court challenges to those rulings, will come next, but some franchise operators are already taking steps to insulate themselves.

Michael R. Gray, a principal lawyer at Gray Plant Mooty in Minneapolis, who specializes in franchise law, said he was working on an “enormous” project for one large franchise operator to revise its franchise agreement and operations manual to remove passages that could invite scrutiny.

Franchisers that do not wish to be considered joint employers should focus on controlling their customer deliverables, but leave the specific processes for creating them — “the things that aren’t part of what the customer sees” — in the hands of their operators, he said.

Michael H. Seid, the managing director of MSA Worldwide, a franchise consulting and training firm, offers a specific example: A company could dictate that its franchisees clean their windows every day, but it should not say exactly when and how the windows get cleaned.

Mr. Seid and Mr. Gray say they expect the labor board’s ruling to lead to years of litigation as companies try to clarify what has become a murky area of employment law.

“It will probably end up at the Supreme Court,” Mr. Gray said. “The sky is not falling, but it’s certainly indicative of a change.”

Read more http://rss.nytimes.com/c/34625/f/640350/s/4962f99c/sc/7/l/0L0Snytimes0N0C20A150C0A80C290Cbusiness0Csmallbusiness0Clabor0Eboard0Eruling0Eon0Ejoint0Eemployers0Eleaves0Esome0Ecompanies0Escratching0Etheir0Eheads0Bhtml0Dpartner0Frss0Gemc0Frss/story01.htm


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