Five New Labor Rules that Could Impact FEDA Members

By Bridget McCrea
Contributing Writer

Federal agencies and commissions have a reputation for moving slowly, but that has not been the case with the Biden Administration’s efforts to rebalance labor regulations in favor of employees. There have been few times in recent memory where so many shifts in previously established labor law were occurring simultaneously, meaning longstanding norms between employers and employees could look quite different a year from now.

One rule change now under consideration would widen the net of which companies count as joint employers while a proposed case decision would outlaw non-compete agreements. Other proposed rules are designed to accelerate unionization by eliminating the requirement for secret ballot elections and allowing union reps to join OSHA workplace inspections. Finally, a rule reinterpreting how prevailing wages are calculated expands the payment of geographically prevailing wages for contractors and subcontractors on federal (or federally funded) construction projects.

Individually, each of these proposed rules, case decisions or changes to existing laws could have negative impacts on foodservice equipment distributors and manufacturers. If any or all of these are implemented, the collective impact could be much greater on employers across a broad spectrum of industries.

Brian Wild, chief government relations officer for the National Association of Wholesaler-Distributors (NAW), observed that labor-related proposals are plentiful in Washington, D.C., right now. At least some of the momentum can be attributed to the current presidential administration. “The last decade was slower and not as regulatorily focused; Republican presidents don’t typically engage in new regulations on the labor front,” said Wild, a former U.S. Senate, House and White House staffer.

“Thematically, there’s a rotation of which issues seem to matter here in D.C., and right now labor issues are hot-button issues,” Wild continued. “Right now, the Department of Labor is very active at both the federal and state level.” That activity isn’t expected to wane anytime soon and in fact, Wild predicts that “we are currently on the front edge of a wave of regulations that are going to come out.”

Keeping tabs on what’s going on at any given point in Washington, D.C., is never easy for busy distributors and manufacturers. During this particularly active period, trying to understand the current proposals and their potential impacts on business may be even more difficult. To help, we’ve outlined what FEDA sees as the top five proposals that its members should be watching right now.

This article provides an overview of each of these troubling rules and provides expert input on what any new regulations — or any changes to existing rules and regulations — could mean for American businesses as regulatory bodies look to redefine labor standards.

Joint Employer Status Under the Fair Labor Standards Act (FLSA)
The National Labor Relations Board (NLRB) wants to revise and clarify the responsibilities of employers and joint employers to employees who are in “joint employer arrangements.” Under the National Labor Relations Act (NLRA), an employee may have — in addition to their employer — one or more joint employers. A joint employer is defined as any additional individual or entity who is jointly and severally liable with the employer for the employee’s wages. According to the current regulation in part 791, the NLRB says multiple persons can be joint employers of an employee if they are “not completely disassociated” with respect to the employment of the employee.

The NLRB is proposing a number of revisions to the current regulation. According to the U.S. Chamber of Commerce, joint employer status may currently only be established where a company exercises “substantial direct and immediate control” over the essential terms and conditions of another company’s employees. The NLRB, an independent federal agency, is seeking to redefine that long-held standard with a proposal to determine joint employer status as two or more employers that “share or codetermine those matters governing employees’ essential terms and conditions of employment.” These qualifying employment conditions would include wages, benefits and other compensation, work and scheduling, hiring and discharge, discipline, workplace health and safety, supervision, assignment, and work rules.

Business advocacy groups believe the proposed changes will negatively impact businesses. The rule, which is in the final stages of approval, could extend liability from franchisees and contractors all the way up to the name brand, explained Glenn Spencer, senior vice president of the U.S. Chamber’s employment policy division. This change could have a profound impact on the foodservice industry, where many national chains use a model where individual locations are owned and operated by franchisees. “What the NLRB wants to do is make the franchisor liable for everything that happens at the franchisee level,” Spencer said, “mainly because that will make it easier for unions to organize — something that’s difficult to do on a store-by-store basis.”

In response to the NLRB’s proposed rulemaking announcement to revise the Standard for Determining Joint Employer Status, the National Restaurant Association sounded the alarm that the change would inflict substantial harm to the business community, particularly foodservice employers. “Currently, franchisees and franchisors maintain an arms-length business relationship that allows both to be confident about their status and of their obligations to their respective employees,” the association wrote in December 2022. “The proposed rule’s expansion of the joint employer standard to include a never-exercised contractual reservation of right to control would, likewise, create havoc.”

The impact of the rule change is likely to extend far beyond the restaurant industry to equipment distributors and manufacturers. Wild said the proposed changes could “dramatically confuse” the relationships between contractors and subcontractors, and also between warehouses that operate in different states but have agreements in place to combine energies and/or efficiencies. “This is really an effort by the labor unions to try to get into industries where they’ve had a hard time organizing,” Wild pointed out. “To me, it’s pretty obvious political gamesmanship on the labor side, versus actually having any practical need from either the employer or employee perspective.”

Card-Check Union Organizing
In August, the NLRB resurrected key elements of a policy that requires businesses to bargain with unions without holding formal elections. The policy, called the Joy Silk doctrine, would allow unions to organize simply by signing cards indicating their support to unionize. The doctrine was in place from 1949 to 1969, when the Supreme Court’s ruling in NLRB V. Gissel Packing led to a new standard that required unions to form through a formal vote. However, the current NLRB leadership is seeking to revive elements of Joy Silk with its recent decision in Cemex Construction Materials Pacific, LLC, which shifts the burden to companies to petition for a secret ballot election. 

In a coalition letter to the NLRB, the U.S. Chamber expressed “serious concerns” with several issues that were coming before the NLRB at the time. Specifically, it urged the NLRB to reject the legally flawed arguments that it should impose card check organizing via case law and interfere with employer speech rights protected under the National Labor Relations Act (NLRA).

“This move by the general counsel to force card check organizing on workers and employers represents a radical overreach and misunderstanding of the law,” Spencer explained in the letter. “The doctrine is inconsistent with longstanding precedent, court rulings and the text of the National Labor Relations Act. Congress has repeatedly rejected efforts to impose card check, and the general counsel cannot do so outside of the legislative process. We will oppose this action with every tool at our disposal, including litigation if needed.”

Spencer told FEDA News & Views the new rule could make it easier for unions to organize. “Once they get 50 percent of the workforce to sign the cards, then they’re automatically recognized; there’s no need for an election,” he explained. One roadblock is that if a union claims a majority support of employees via card check, employers can still file a petition with the NLRB to seek an election.

Non-Compete Clause Rule
In January, the Federal Trade Commission (FTC) proposed a new rule that would ban employers from entering into non-compete agreements with their workers. Then in May, the NLRB’s general counsel issued a memorandum urging the NLRB to create a case decision declaring that “the proffer, maintenance and enforcement of employee non-compete agreements by employers is unlawful under the NLRA.” Taken together, the two agencies are clearly determined to end the use of non-compete agreements, even when they are essential to safeguard an employer’s proprietary information.

“The General Counsel’s attempt to convince the NLRB to outlaw non-compete agreements based on scant legal support and a highly selective reading of case law is puzzling at best and troubling at worst,” Spencer pointed out in a white paper at the time. “While the memorandum is dressed up to look like a compelling legal analysis, it rests on highly questionable legal grounds, and the myriad cases it cites in support of the proposal have little or nothing to do with non-compete agreements or their lawfulness under the NLRA. As such, it is, charitably, a jurisprudential bait-and-switch.”

The National Restaurant Association’s Restaurant Law Center also expressed its concerns in comments to the FTC. The association said the notice of proposed rulemaking is unnecessary and counterproductive because business owners in the restaurant industry use non-competes only sparingly. Further, it noted the commission lacks clear Congressional authorization to regulate non-competes and the regulation of non-competes has been a state law issue for over 200 years.

Wild says immediate pushback to the FTC’s proposal forced the agency to delay any decisions by one year. He says the issue is of particular interest to NAW, whose members put a lot of time, training and energy into new hires who often come onboard fresh and ready to learn — but who are not overly experienced or trained.

“Distributors invest in those associates with a high degree of skilled training and give them skills that they can use across industries,” Wild said. “Distributors also work on thin margins, so in many cases what they teach their employees translates into a competitive edge that should be protected.”

OSHA Union Walkarounds
Another proposed union-related rule concerns the rights of union representatives to be able to accompany OSHA inspectors during the inspection process/facility walkaround. According to the National Federation of Independent Business (NFIB), the new rule is a concern for small business owners that have “every interest in limiting access to company facilities only to authorized personnel and to government inspectors to the extent required by law.”

In 2016, the NFIB filed a lawsuit against the rule, which was proposed by OSHA under the Obama Administration. In the lawsuit, NFIB maintained that OSHA was “over-reaching and has no authority to require businesses to permit union representatives into areas not otherwise open to the public.”

The rule has been “floated before and pulled back” numerous times, Wild said, but he expects to see the rule published and the comment period to start in the near future. “This is really a backward way of unionizing that basically says, ‘Hey, we’re not going to go through the process of voting and deciding that we want collective bargaining, but we’re going to go ahead and have a union representative walk around with OSHA investigators and if there are violations, it might drive our decision to unionize,’” he explained.

“I don’t know how they’re going to write that rule and make it so that it has legal standing,” Wild said. “But because we’re in the third year of an administration’s first term, this is when all of the rules start rolling out. I think they’re going to go ahead and push that out within the next 30 to 45 days.”

The U.S. Chamber is similarly concerned about the proposed union walkaround rules. Spencer said the Office of Management and Budget (OMB) will have to approve the rule first and that the notice and comment period will soon follow. “We, of course, will be submitting comments when that comes out,” Spencer added.

The Davis-Bacon Act
According to both Wild and Spencer, this is one labor law that doesn’t directly impact distributors until those companies are serving as contractors or subcontractors on federally funded or assisted construction contracts. Still, it’s yet another labor-related rule that’s already been finalized, so companies should be aware of it.

According to the Department of Labor (DOL), the Davis-Bacon Act applies to contractors and subcontractors performing on federally-funded contracts in excess of $2,000 for the construction, alteration or repair (including painting and decorating) of public buildings or public works. Davis-Bacon Act contractors and subcontractors must pay their laborers and mechanics employed under the contract no less than the locally prevailing wages and fringe benefits for corresponding work on similar projects in the area.

In August, the DOL published a final rule updating the way it calculates prevailing wages under the Davis-Bacon Act and sets requirements for how labor standards are administered and enforced on federal and federally assisted construction projects. The final rule goes into effect on Oct. 23, 2023.

With this rule, Spencer said the DOL wants to “make it easier to reach higher wage determinations for federally-funded construction projects,” with the idea being that if your business is engaged in construction that uses federal funds under the current policy, you’re supposed to look at (and use) the wage determinations.

“The bottom line is that the DOL is trying to drag more businesses into the Davis-Bacon web, where you would have to pay higher prevailing wage rates,” Spencer added. “So even though you might be a non-unionized firm, you still get stuck paying union wage rates on construction projects.”

Now is the Time to Speak Up
Business owners concerned about any or all of the rules highlighted in this article can make a difference by communicating those concerns to their elected officials. “Make sure your legislators — both on the House and Senate side — understand that this stuff matters and that you’re concerned about it,” Spencer urged. “Let them know your concerns about the direction the government is taking in terms of ‘unions at all costs,’ and trying to force employers to grant union concessions.”

Wild said it’s important to understand that the rules can negatively impact both the employer and its employees. Litigation is both costly and time-consuming, he added, and that’s where industry coalitions can truly prove their value.

“When FEDA joins forces with NAW, which in turn joins with the Coalition for a Democratic Workplace, we can combine our resources, take it into the courts and hopefully get the rule(s) repealed. We have a pretty decent success rate on it, but it just takes time and money.”