FMI, NGA give thumbs-down to proposed joint-employer rule change

FMI-The Food Industry Association (FMI) and the National Grocers Association (NGA) have called on the National Labor Relations Board (NLRB) not to proceed with a proposed new joint-employer standard.

In letters to the NLRB this week, FMI and NGA said a Notice of Proposed Rulemaking (NPRM) for determining joint-employer status, released by the board in September, would result in an overly broad standard in deciding when two or more businesses share direct and indirect responsibility of a worker.

If implemented, the two grocery industry trade groups contend, the new rule could trip up the food and CPG supply chain by upending operational relationships in place for decades and put grocery businesses at risk to legal uncertainty and increased litigation.

“FMI members have unique needs in meeting staffing requirements in stores, distribution facilities and divisions throughout their business operations. In addition to hiring direct employees, these businesses fulfill operational needs through vendors, contracts and temporary staffing relationships. Utilizing the expertise and specialty skills of these separate businesses should not constitute a joint-employer status,” Christine Pollack, vice president of government relations at FMI, said in a statement. “The NPRM’s significant expansion of the essential terms and conditions of a joint-employer relationship to capture health and safety standards and hours of work and scheduling would negatively impact every aspect along the food and consumer goods supply chain.”

The NPRM aims to rescind and replace the joint-employer rule that went into effect on April 27, 2020. Under the proposal, two or more employers would be deemed joint employers if they “share or co-determine those matters governing employees’ essential terms and conditions of employment,” such as wages, benefits and other compensation, work and scheduling, hiring and discharge, discipline, workplace health and safety, supervision, assignment and work rules. In assessing joint-employer status, the board would weigh evidence of direct and indirect control over these employment terms.

According to NLRB Chair Lauren McFerran, there has been no clear standard for defining joint employment that’s consistent with the National Labor Relations Act. “Unfortunately, the board’s joint employer standard has been subject to a great deal of uncertainty and litigation in recent years,” she stated when announcing the NPRM.

The proposed new rule, however, would not provide sufficient clarity because it would effectively classify any business-to-business relationship factoring in health and safety standards, work hours and scheduling as a joint-employer relationship, FMI and NGA argue.

“Taken together, these ill-defined provisions provide an expansive conceptualization of joint employer, where most business-to-business relationships involving employees likely constitute an ‘employer relationship,’ John Richard, senior manager of government relations and policy analysis at NGA, wrote in a Dec. 7 letter to the NLRB.

In the proposed rule change, the NLRB would weigh direct and indirect control over a range of employment terms in assessing joint employment status. / Photo: Shutterstock

Businesses along the grocery supply chain—from retailers and distributors/wholesalers to manufacturers, producers and other providers—enlist a plethora of local, regional and national vendors, contractors and outside staffing to supply products and move goods, Pollack explained in a Dec. 7 letter from FMI to the NLRB. Third-party firms provide food retailers with staff for product sorting, palletization, loading of trucks, transporting products from manufacturers or warehouses to retail stores, unloading and product resorting, depending on storage requirements such as temperature.

Products then must be placed on shelves or in store sections, and retailers use their own employees and tap vendors, contracted help and other staffing resources to fill gaps in stocking needs, including specialized skills for stacking produce or bakery products and temporary assistance in stocking holiday or seasonal displays, she said. And at each step in the food and consumer goods supply chain, various health and safety regulations must be met.

“The decisions to allocate additional workforce—whether by direct employment or through vendors, contracts or staffing firms—to handle increased e-commerce, locally sourced and foodservice demands of American consumers is of the utmost importance to FMI members,” Pollack noted in the letter. “Uncertainty about whether these staffing decisions and business-to-business relationships, some of which are with local, small vendors, would trigger a joint employer adjudication is very unsettling.”

Independent grocers face special concerns under the NPRM. For example, many of these retailers participate as members of cooperatives to enhance their scale and purchasing power and access a wide menu of services, such as distribution, private label, marketing and others. But under the proposed rule change, cooperatives would be directly implicated as joint employers, NGA pointed out in the letter.

“The practical effect of these changes is that the formation and maintenance of a cooperative business model will be discouraged to the point of extinction in the grocery market, which will lead to further consolidation in our industry,” Richard stated.

As small businesses, independents would have greater legal exposure under the NPRM as well, according to NGA.

“The likely effect is that independent grocers will be wrapped into de facto ‘employer’ status without their consent or knowledge. Most of our members are considered small businesses under the Small Business Administration definition and do not have large legal teams to address the increased litigation that this proposed rule would unleash,” the NGA letter said.

In a statement on Thursday, Richard said, “As independent community grocers and wholesalers continue to face labor shortages and a workforce gap, such a regulation from the federal government would not only exacerbate these challenges but would expose them to increased liability and labor costs that are difficult to absorb in an industry with slim profit margins.”

FMI also signed a letter to the NLRB from the Coalition for a Democratic Workplace (CDW), a group of employer trade associations expressing concern about the NPRM. The coalition called the proposed joint-employer rule change “arbitrary and capricious,” saying it “diverges from common law” and would undermine collective bargaining and destabilize labor relations.

Other food- and retail-related industry groups signing the CDW letter include the American Bakers Association, Independent Bakers Association, International Council of Shopping Centers, International Foodservice Distributors Association, National Council on Chain Restaurants, National Restaurant Association, National Retail Federation and Restaurant Law Center.