Could New Labor Regulations Mean That Unions Are Headed For Retail Automotive?

The National Labor Relations (NLRB) board ruled yesterday that companies can now potentially be held responsible for labor violations committed by their contractors. The ruling was based upon whether or not Browning-Ferris, a waste management company was responsible for employees that they contracted out to run one of their facilities in California. According, to the NLRB, they are considered a “joint-employer,” and are more responsible for the labor rights of those employees.

Experts seem to feel this ruling could be felt strongly in the fast food industry. When a franchisee runs a McDonalds, they are in charge of all localized management, hiring and human resources considerations. Now, after this ruling, the parent company has more to be concerned with. What if that McDonalds treats their employees terribly or doesn’t pay them? Before, it was a 100 percent localized issue, now that’s not so clear.

This ruling is significant because it might overturn years of regulations according to one national expert. Randy Johnson, senior vice president at the U.S. Chamber of Commerce spoke out about the ruling. Johnson said, “This decision has broad implications, as it appears to upend decades of settled law defining who the employer is under the National Labor Relations Act.”

There are rumors that because of this ruling large restaurant chains such as McDonalds and Burger King will either assert more authority over their franchisees or cut ties with them due to the increase in regulation. However, that’s fast food … what would happen if these regulations came to impact the franchise-dealer relationship?

What if automakers became liable for the working conditions of dealership employees? While that isn’t as much of a concern, what if unions were able to more easily negotiate for the dealership staff? How would unions getting involved with dealership employees’ impact pay scales, benefits and bottom lines?

In outreach with legal experts, the general consensus was that it’s too soon to know if this regulation will be able to touch retail auto. It’s too soon to know because the ruling with Browning-Ferris involved contracting out employees to staff a facility under a certain brand. Certainly retail automotive doesn’t function this way. However, with the concern that fast food franchises will be impacted, some have wondered if this decision might be moved to one day impact the dealer-automaker relationship. The concern isn’t for retail automotive, but for numerous other industries as well.

Marshall B. Babson, an attorney working for the U.S. Chamber of Commerce, wrote a brief opposing this new ruling. Speaking on the subject of the decision, Babson said in a statement, “The decision today could be one of the more significant by the NLRB in the last 35 years. Depending on how the board applies its new ‘indirect test,’ it will likely ensnare an ever-widening circle of employers and bargaining relationships.”

We will keep you updated on this story as it develops.