McDonald’s, FedEx, and Shifting Legal Views of Employment

Sometimes seemingly obscure legal rulings indicate major changes in the struggle for social and economic justice. Two recent rulings involving independent contractors and franchise employers could help enable workers and unions to make breakthroughs in improving wages and working conditions.

The National Labor Relations Board (NLRB) ruled that McDonald’s is a “joint employer” of franchisees’ workers and is accountable for their franchisees’ questionable and sometimes illegal actions. Corporations often use franchise agreements to avoid fulfilling legal personnel requirements by shifting responsibilities to franchisees. As the Wall Street Journal suggests, the NLRB decision exposes large corporations who use franchise agreements to potential liability claims.

In a second decision, the Ninth Circuit Court of Appeals (Western California, Washington and Oregon) overruled a District Court and said that FedEx has misclassified employees as independent contractors. Legally, independent contractors can’t be directly supervised, supplied with workspace or tools, or otherwise treated like employees, and because they are not considered employees under Labor Management Relations Act, Section 2. Consequently, independent contractors have limited legal protections and do not have the right to organize unions.

Companies like FedEx misclassify employees as independent contractors to avoid paying insurance premiums, minimum wages and overtime, unemployment insurance, and workers compensation. FedEx reduced its labor costs 25% by shifting expenses to the independent contractors. If the Appellate Court decision is sustained and if it is expanded to include the more than 45 class action and individual lawsuits and the 25 state tax and other administrative proceedings claiming misclassification, FedEx could have to pay hundreds of millions, perhaps billions, of dollars in back taxes, back pay, and various fines. No wonder the business press has said that the decision could have a “seismic impact.”

While these cases won’t be resolved any time soon, they’re important because they reflect changing attitudes toward work and inequality. Both cases evolved within the larger context of deregulation, precarious employment, cost shifting, and the loss of workplace protections over the last 40 years as employers sought to lower labor costs and undermine unions. For example, building contractors have increasingly used subcontractors to evade union contracts. Especially in deindustrialized areas, displaced manufacturing workers who had toolboxes and pickup trucks became part of a pool of independent contractors. This placed pressure on unionized employees and contractors to lower wages and sign concessionary “project agreements.” As a result, wages, benefits, and working conditions all declined, especially in unionized industries.

Other employers and industries turned to personnel and temp agencies. ManpowerGroup became one of the nation’s largest employers by acting as a hiring hall for independent employees and contractors. Kelly Services has become the largest specialized clerical /technical agency. Smaller niche labor market agencies have also sprung up, such as Labor Ready, which provides day labor for construction and cleaning.

Even employers of professionals, who once thought of themselves as models of justice and fair employment, have embraced the use of independent contractors and temp agencies. For example, universities, hospitals, and newspapers have laid off employees and hired subcontractors to do both professional and non-professional work. Many universities treat adjunct faculty as episodic and easily replaceable independent contractors, and they hire subcontractors to handle maintenance, security, and food services.

These recent legal rulings don’t just tell us about changes in work, though. They also suggest reasons to hope that employment conditions will improve in the future. First, because precarious employment has become more common, most Americans probably know someone who has experienced job loss and/or economic injustice. Coupled with newspaper stories and much-discussed books about inequality and with Occupy Wall Street and its references to the 99%, we now have a national narrative – popular and intellectual — about economic injustice, low wages, and unfair treatment at work. Just as state courts overturning gay marriage bans reflect a broad change in public attitudes, these recent employment rulings reflect a change in public awareness, political views, and, to a lesser extent, actual public policies.

Second, the legal cases dramatize the importance of electoral politics. Despite their failings (which have been well documented on this site), Democrats make significantly better appointments to the court and other legal and regulatory agencies than Republicans do. While Democrats don’t always represent the interests of their base very well, their appointments are still more likely to rule in progressive ways than are judges and regulators appointed by Republicans. In the case of the NLRB, for example, the new board members appointed by Obama are more sensitive to worker and labor rights than were earlier members appointed by Bush. No wonder the Republicans have created a logjam over judgeships given the role of justices deciding social and workplace issues. Voters who care about workplace justice should consider the power of these appointments when they go to the polls.

Third, for a decimated and often moribund labor movement, these rulings and the changing attitudes that they reflect provide the groundwork to test new organizing approaches. We see this in the growth of the fast food workers movement and the willingness of organized labor to embrace pre-majority or minority unionism. These experiments in new organizing approaches provide hope that a revitalized labor movement can help provide a voice for workers whether they are unionized or not. They also also provide support and an education in organizing for young and precarious workers fighting for job security and economic justice in warehouses, restaurants, and big box stores like Wal-Mart.

If the FedEx and McDonald’s decisions had occurred in an intellectual, political, and movement vacuum, they might not matter much. But these rulings both reflect and further enable a broader and growing movement for economic justice that could, indeed, be “seismic.”

John Russo

This entry was posted in Contributors, Issues, John Russo, Work, Working-Class Politics and tagged , , , , , . Bookmark the permalink.

3 Responses to McDonald’s, FedEx, and Shifting Legal Views of Employment

  1. Will Shetterly says:

    Another fine post. You need buttons to make it easier to share posts on Twitter, Facebook, G+, and etc.

    Like

  2. nedhamson says:

    Reblogged this on Ned Hamson Second Line View of the News and commented:
    Holy moly, Guess there will be a bill introduced by GOP to limit NLRB’s ability to make rulings that impact franchise operations and independent contractor arrangements

    Like

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