Equitable Growth delivers comment letter responding to the National Labor Relations Board’s Advanced Notice of Proposed Rulemaking on Joint-Employer Standard

The Washington Center for Equitable Growth this week delivered a comment letter (opens in a new tab) responding to the National Labor Relations Board Advanced Notice of Proposed Rulemaking on Joint-Employer Standard (opens in a new tab). The comment letter responds to the NLRB’s planned rescinding and replacing of the previous joint-employer rule that took effect on April 27, 2020, which limited legal liability of joint employers by modifying the definition of a joint employer for certain employees.

Mounting evidence shows that the fissuring of the workplace—a phenomenon where lead companies delink previous direct employment relationships within production and service provision among a network of outsourced subcontractors, independent contractors, and other business-to-business relationships such as franchising—fosters rising labor market inequality and distorts who shares in the gains of economic growth.

Lead companies often exert significant control over workplace practices, but with the previous limited joint-employer standard, they have limited legal liability under the National Labor Relations Act to uphold workplace protections, and they are not under obligation to bargain with the workers who are directly employed by subcontractors or franchisees. This, in turn, exacerbates trends of rising income inequality and declining job quality that distort the U.S. labor market and subvert U.S. workers from sharing in the gains of growth.

The comment letter discusses key points on the impact of workplace fissuring and how a stronger joint-employer standard is beneficial for the economy. Specifically:

• Norms of fairness and pay equity within workplaces have fractured as firms outsource parts of their businesses, exerting downward wage pressures on contracting firms. As such, income inequality between firms (opens in a new tab) has grown more than within firms, partially explaining overall trends in rising U.S. income inequality.
• Nearly 20 percent of the U.S. workforce (opens in a new tab) is in industries where fissured arrangements are standard practice, making this a wide-scale issue. Establishing an adequate joint-employer standard will help this significant minority of U.S. workers be able to bargain to share in the value they create.
• Research on franchising finds that franchisors exert control over workplace practices in establishments owned and operated by franchisees, demonstrating the need for a joint-employer standard that holds them responsible for working conditions.
• Boosting the effectiveness of collective bargaining through the proposed joint-employer rule is likely to increase job quality, with research showing that union establishments are more likely to enforce labor regulations (opens in a new tab), such as the Occupational Safety and Health Act.
• Black and Latino workers are overrepresented in nonstandard work arrangements, such as temporary agency jobs—positions that tend to pay lower wages and be more dangerous (opens in a new tab) than comparable jobs embedded in traditional employment relationships—highlighting the need to make it easier for these workers to negotiate with the firms that have control over their working conditions and revise the standard for establishing which employers are liable as joint employers.

Read the full letter (opens in a new tab) submitted to the National Labor Relations Board.