A. Introduction
Over the last few weeks, there has been a great deal of discussion in the legal media[1] regarding the National Labor Relations Board (NLRB or Board) General Counsel’s (GC) argument to the Board, that McDonald’s USA, LLC, as franchisor, is a “joint employer” of its franchisees’ employees throughout the country. If the GC’s argument in this case, which is currently pending before the Board, is successful, franchisors, as joint employers, would be exposed to liability for the unfair labor practices and collective bargaining obligations of their franchisees. This result would have a very significant impact on the franchise industry. Indeed, the International Franchise Association (IFA) considers the joint employer issue its top priority for the coming months.[2]
B. The CNN Case
Last September 15th, in CNN America Inc.[3] the current Board gave us insight on its view with respect to the joint employer concept. CNN, a broadcaster of news with a network of bureaus worldwide, had subcontracted the operation of the electronic equipment at some of its bureaus to Team Video Services (TVS). Under said subcontracts, TVS provided technical support services to CNN through video and audio technicians employed by TVS for news gathering and production. The technicians were represented by the National Association of Broadcast Employees and Technicians, CWA Local 31 (Union). The subcontracts detailed the manner in which said services were provided. Significantly, the subcontracts provided that CNN would reimburse TVS for its labor costs, including wages, benefits, workman’s compensation, insurance premiums and payroll taxes. In addition, CNN would pay TVS a management fee and reimburse TVS for a number of expenses detailed in the subcontracts.[4]
When CNN terminated the subcontracts with TVS and insourced the technical support service work, the Union filed unfair labor practice charges with the NLRB alleging that CNN and TVS were joint employers and that CNN had violated the Act[5] by failing to bargain with respect to the decision and effects of the decision and by making unilateral changes in terms and conditions of employment affecting the new workforce.
C. The Board's Analysis
The Board engaged in a detailed examination of the specifications in the subcontracts and concluded that CNN had considerable authority over the hiring, work hours, staffing levels, assignment and direction of the technicians. Specifically, the subcontracts prohibited TVS from hiring any technicians who worked for any of CNN’s competitors and gave CNN the right to require changes in TVS’ staffing levels, thereby controlling the hiring and number of regular, part-time and over-time hours worked by the technicians. Since, under the subcontracts, CNN decided the news stories to be covered, the workforce required for such coverage and required the technicians to work under the supervision of CNN supervisors, it was clear that CNN wielded substantial control over work assignments and direction of work.
D. The Factors
Citing the factors which the Board had considered in prior cases[6] specifically hiring, firing, discipline, supervision and direction, the Board concluded that CNN exerted significant control over the essential terms and conditions of employment of the technicians and was, therefore, a joint employer with TVS. As such, CNN had violated the Act by failing to bargain with the Union over its decision to terminate the subcontracts and the effects of said decision and by establishing unilaterally the terms and conditions of employment of the new workforce.
Significantly, the Board emphasized that CNN’s argument that the nature of its business required a constant presence of its managerial officials to oversee the operations and work of the technicians was no defense to the joint employer allegation. In fact, the Board considered this argument supportive of the joint employer finding.
E. Conclusion
As the dissent by member Miscimarra pointed out, the CNN Decision signals the current Board’s rejection of the basic principle that has been controlling in this area for over thirty (30) years – that in order to be a joint employer, the putative employer must have “direct and immediate control” over employment matters.
Jerry Morales is Of Counsel in the Phoenix office of Snell & Wilmer. His practice is concentrated in labor, employment and construction law.
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Notes
[1] See Legal Alert dated July 30, 2014. [back]
[2]186 DLR A-14 (9/26/14). [back]
[3] 361 NLRB No. 47. [back]
[4] The specifications in the subcontracts included that TVS would supply full-time and part-time technicians as needed by CNN; CNN would have the right to require changes in TVS’ staffing; TVS would provide CNN detailed, itemized, monthly statements of all payments and expenditures; CNN would provide TVS an additional two percent (2%) of payroll wages and taxes per month which TVS could distribute as merit pay to its employees; CNN would allow TVS to increase its payroll by four percent (4%) per year; CNN had the right to review and approve all of TVS’ payroll transactions; CNN would supply all equipment used by TVS’ employees and would provide insurance coverage for said equipment. [back]
[5] National Labor Relations Act, 29 USC SEC. 151 et seq. [back]
[6] Laerco Transportation, 269 NLRB 324 (1984). [back]
