WASHINGTON—A federal labor ruling released Thursday could put thousands of companies on the hook for workplace disputes and union-organizing matters involving temporary and franchise workers.

The National Labor Relations Board, in a 3-2 ruling splitting the board on party lines, revised its "joint employer" standard for determining when one company shares responsibility for employees hired by another. The change will make it easier for unions to negotiate over wages and benefits for pools of contingent workers.

The change, fiercely opposed by many businesses, come at a time when more companies are turning to temporary contract worker as part of their business model. The ruling could also affect arrangements at franchise companies such as McDonald's Corp. that are in many instances a step removed from workplace matters at their franchises.

The change alters a decades-old approach by the NLRB that said one business couldn't be held liable for employment-related matters at another unless they had direct control over the employees in question. The NLRB is a federal board that referees workplace disputes and oversees union-organizing elections.

The change was supported by the board's three Democrats, with the two Republicans dissenting. The majority said the NLRB hasn't kept pace with an evolving workplace in which an increasing number of U.S. workers are employed through temporary staffing agencies. They cited in their decision a "dramatic growth in contingent employment relationships" that "potentially undermines the core protections of the act for the employees impacted by these economic changes."

The ruling came in a case where a Teamsters local union, the Sanitary Truck Drivers and Helpers Local 350, asked the NLRB to consider Browning-Ferris Industries of California Inc. and Leadpoint Business Services, a Phoenix-based staffing firm that provides the company with temporary workers, joint employers of a group of subcontracted workers hired through the staffing agency.

In the past, companies generally had to share decision making on employment matters such as firing, hiring and discipline in ways the board said would have a meaningful effect on the workers. Under the revised standard, the NLRB also will consider if a business exercises indirect control through an intermediary, or has reserved the right to do so. The board will consider this on a case-by-case basis, board officials said Thursday.

"Our aim today is to put the board's joint-employer standard on a clearer and stronger analytical foundation, and, within the limits set out by the act, to best serve the federal policy of 'encouraging the practice and procedure of collective bargaining,'" the Democrats said.

The board's dissenting Republicans said: "The result is a new test that confuses the definition of a joint employer and will predictably produce broad-based instability in bargaining relationships."

Write to Melanie Trottman at melanie.trottman@wsj.com

 

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(END) Dow Jones Newswires

August 27, 2015 16:05 ET (20:05 GMT)

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