In response to last week’s National Labor Relations Board’s (NLRB) 3-2 decision to change the joint-employer standard (which I briefly noted here), the Wall Street Journal editorial board writes that it “radically rewrites U.S. labor law and upends thousands of business relationships.” The majority’s goal in so doing is “to best serve the Federal policy of ‘encouraging the practice and procedure of collective bargaining.'” Indeed, the change will make it easier to organize contract and franchise workers. It also attempts to stave off (or co-opt, perhaps) fundamental changes in employment.

Previously, the joint-employer standard held that multiple employers were joint employers of an employee if they “share or codetermine those matters governing the essential terms and conditions of employment.” Further, the potential joint employer must possess “sufficient control” over those essential terms and conditions “to permit meaningful collective bargaining,” it must also exercise that authority, and it must do so “directly and immediately.” Also, the control must be “substantial,” not “limited and routine.”

The new standard (which applies retroactively) does not require the potential joint employer to actually exercise control over terms of employment, only that they possess that authority (i.e., by contract). Also, the control doesn’t have to be exercised directly and immediately.

The dissent notes that

Contrary to [the majority’s] characterization, the new joint-employer test fundamentally alters the law applicable to user-supplier, lessor-lessee, parent-subsidiary, contractor-subcontractor, franchisor-franchisee, predecessor-successor, creditor-debtor, and contractor-consumer business relationships under the Act. In addition, because the commerce data applicable to joint employers is combined for jurisdictional purposes, the Act’s coverage will extend to small businesses whose separate operations and employees have until now not been subject to Board jurisdiction.

Walter Russell Mead writes about the decision and how the nature of employment has changed over the years:

In the blue model world, with the economy dominated by large bureaucratic corporations it was relatively easy to improve worker compensation through legal mandates.  Labor law began to extend the patriarchal responsibilities of companies toward their employees, mandating rising levels of benefits. For several decades things worked reasonably well. Unfortunately, the ever-rising costs imposed by this approach, however beneficial to workers, ran into the buzzsaw of economic transformation. . . .

The response was the creation of a new economic sector in which the patrimonial relationship between worker and employer was attenuated. Temporary employment contractors, subcontractors, the rise of franchise operations, the rise of self employed providers of services once produced in house: these and other changes in the employment market increasingly simplified the employer-employee relationship: I do the job, you give me the money, we both go home.

The majority decision from the NLRB reads like an attempt to go back to the way things were. Indeed, it notes that the previous standard leaves “the Board’s joint-employment jurisprudence increasingly out of step with changing economic circumstances, particularly the recent dramatic growth in contingent employment relationships.” Modern employment doesn’t fit in with NLRB rules, so change the rules to get the result we used to get.

But maybe we should instead be considering what results we really want. Noah Smith takes a positive view of the employment changes: “Technology is taking away one big benefit of the old corporatist economy — security — but in its place it’s giving us something we had almost forgotten how to value. It’s giving us independence.” Similarly, Diana Furchgott-Roth cites the efficiency of franchises and contractors in providing services. And see also James Surowiecki in the New Yorker last month, arguing that given these changes in how we work, we need to rethink the safety net. As Mead argues,

We need to be thinking about new forms of labor market regulation and policy that ensure that, as the old system of employment gradually fades away and a new one gradually emerges, the new system is one that offers the best possible mix of opportunity and security to ordinary people.