NLRB Ruling Sending Shock Waves and Uncertainty Across the Economy


We reported last week on the National Labor Relations Board’s ruling that (1) businesses share equal responsibility for unfair labor practices with their contract labor suppliers (co-employment) and (2) temporary workers of those suppliers have collective bargaining rights and may join unions. While the ruling in isolation is significant, its import must also be considered in the context of the gathering wave of worker classification and other labor-related cases that have been adjudicated in favor of workers being employees. In this follow-up article, we consider some of the potential impacts and responses to the ruling, as well as the basic message for procurement practitioners.

Potential Impacts

If the ruling becomes binding on businesses, there appear to be significant impacts on businesses in general and more pointedly for businesses in particular segments:

  • In general, businesses that use supplier-provided temporary labor will now be considered co-employers with those suppliers and may need to accommodate unionization of that temporary workforce. This effectively changes the costs and risks beared by businesses that use such labor – a large majority of businesses – such that they will need to re-evaluate their use of that type of labor and the suppliers that provide it.
  • For some kinds of businesses, the potential impacts and consequences could be more significant:
    • Franchise businesses are already facing the question of co-employment existing between franchisor and franchise. (See: NLRB ruling being challenged in court by McDonalds). Now that question may have been answered, with new costs and risks (from co-employment and unionization) being shifted to franchisors. This shift has the potential to completely disrupt the franchise model, which makes up a share of a broad range of business segments.
    • Businesses that already have unionized labor forces, including hospitality workers and healthcare nurses, carry heightened risk of unionization of temporary workers, who would be able to simply join the union and not have to form one.
    • Finally, temporary staffing suppliers to all of the above businesses face a diminishment of the value they provide – the elimination of co-employment risk – and thus the compromising of their established business models and margins. (Traditional staffing businesses tend to have high fixed cost structures.)

Certainly all of the above cases would have an impact on the contingent workforce procurement approaches – especially temp labor – that are now considered well-established and routine.

Different Responses

It is unsurprising that, depending on the interests they represent, different industry groups and other parties have different interpretations and responses to the ruling.

  • Labor unions, such as the AFL-CIO, and other workers’ rights organization view the validity of the ruling as self-evident and express confidence that it will be binding on businesses.
  • Business interest groups, such as the US Chamber of Commerce, have generally indicated its alarm about such anti-business overreach of the NLRB, expressing confidence that the ruling is destined to be overturned in the courts or by Congress.
  • Finally, there are some that question the actual authority of the NLRB to reach such a reversal of long-standing interpretations of the National Labor Relations Act (NLRA), which dates back to 1935. Positions range from those of the NLRB being merely a political organ of the current administration to the NLRB being the legitimate interpreter of the NLRA regs applied in actual circumstances.

As the above broad range of different interpretations and responses to the recent NLRB ruling suggest, there is a considerable uncertainty about how the ruling will actually play out.

Procurement: Ripples or Tsunami?

Perhaps a good metaphor for the position of contingent workforce procurement relative to all of the above is someone standing on a beach facing the possible scenarios of encountering some big waves that will subside or a massive tsunami that will alter the contingent workforce supply chain and existing practices.

In such a situation, the initial response of procurement should be to take the NLRB ruling seriously and begin some alternative scenario planning. If the wave rolls forward, how will we need to respond in terms of strategic sourcing and supplier management? Even if the NLRB ruling’s effects turn into subsiding ripples, there will still likely be value to such a planning exercise in the form of enhanced planning skills, a more flexible, alert mindset for future change and the potential to discover new sourcing alternatives that may be useful today.   

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