Counterproductive National Labor Relations Board

During the dark days of the recent recession, the National Labor Relations Board (NLRB) forbade Boeing from opening an aircraft manufacturing plant in South Carolina.  The South Carolina community and state government welcomed the plant, had workers with the high quality skills suited to Boeing’s Dreamliner, and had a track record of constructive relationships between employers and workers.

The NLRB cared nothing about the quality of the South Carolina fit nor that unionized jobs in Boeing’s Washington state production line would continue.  NLRB was concerned that South Carolina’s status as a right-to-work state and Boeing’s resentments over the strike history of Boeing’s Washington state workforce may have played roles in choosing South Carolina.  The NLRB was clearly concerned about prospective unionized jobs, not the other 93% of American jobs.

The NLRB continues with that perspective, adding new chapters to its pro-union diktats on how Americans should be employed.  The NLRB has decided that franchisees are frequently not the sole employer of their employees, even if they are exclusively in charge of hiring, firing and jobsite conditions.  As well, the NLRB is trying to ban conflict labor dispute arbitration in lieu of the far more disruptive and costly class action suits.

Under longstanding NLRB rules, a company was an employer if it had direct control over employment conditions. If two companies had control over the workers, then they were joint employers. But an NLRB alteration can make employers out of both franchiser and franchisee. The franchiser is an employee even if it has indirect control or even just the potential for control. That imposes all the reporting and union organizing accommodations on both parties, in effect forcing the franchiser to deal with large national unions despite having limited or no control over the thousands of employees at hundreds of franchise sites.

Regardless of how much turmoil and cost this means for franchise industries, it is more convenient for unions seeking to organize franchisee employees, and of course that’s what the NLRB cares about most. The welfare of the 780,000 franchise establishments and the continued employment of 8.9 million franchise employees are remote secondary issues for the NLRB.

The independent workers who constitute the gig economy have grown to about 28 million members, but aggressive attempts are underway to reclassify them as employees instead of independent contractors. Employees generally cost more and come with complex rules and massive paperwork obligations for the employer.

One of the largest cases of this involved Uber in California and Massachusetts. While there is a settlement between the parties, the NLRB decided that in future class action suits, not arbitration must be used in these cases. That stance runs in direct opposition to arbitration being specified in most short-term or “gig” employment contracts. NLRB’s insistence on class action lawsuits increases the cost and impact of each court decision, and makes its participation in the suits easier.

There was a surge of independent contractors (or gig workers) in the 21st century. Most of these are self-employed but some work for agencies. Many of the workers using their own assets (car, tools, computers) work independently as an income supplement. Some analysts understand that many gig economy workers will be replaced by robots and some jobs are already better done by robots. Low skill jobs typical in franchise operations are not what populate today’s roster of available jobs. Indeed, there are skills shortages that keep some jobs unfilled for lengthy periods.

Some observers think a few “benefits” such as income-proportionate contributions toward 401(k) medical insurance should be made standard for gig workers. Others try to load up mandatory gig worker benefits to levels that only government workers receive.

The exodus of low skill jobs to offshore competitors is being compounded by regulators who add to the challenges facing American workers. They foster pressure to organize unions within franchises. They want the minimum wage forced up to a $15 level. They want to ban the use of arbitration to settle gig economy labor disputes. They want a bloated mandatory benefit packages for gig economy workers, and they ignore the robotic innovations that perform routine jobs faster and cheaper than humans.

Each of these challenges will shrink the demand for low-income jobs. The unions and NLRB can pretend for each other that their meddling with employer obligations is a victory, but they will soon taste a bitter scarcity of jobs for unionized members.

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