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Reforms that Modernize the Economy

September 12, 2022 — Modern Economy Project

Employers need certainty now more than ever, and the NLRB can best serve the modern economy by focusing on bipartisan efforts to increase transparency and fairness in enforcement actions.

It’s an annual Washington tradition to announce workforce policy right around the Labor Day holiday, and 2022 was no different. As Americans prepared for barbecues, college football, and getting our sweaters out of the closets, the National Labor Relations Board (NLRB) rolled out an expected proposal to change the “joint-employer” standard.

The agency proposed a new joint-employer standard which would substantially broaden the responsibility of companies for potential labor violations of other companies. For example, franchisors would be responsible for the actions of their franchisees’ employees and contractors would assume broader liability for the actions of other companies’ employees. This policy debate has narrowed or broadened depending on which administration is in power; yet, the certainty businesses need, now more than ever, is for clarity on the rules so they can plan and grow.

Merit of the policy aside, the constant pendulum swing back and forth on policy is concerning. Businesses – large and small – rely on some level of predictability out of Washington. It allows them to plan to grow, move, hire, pay taxes, etc. It hurts the American economy if every time we have a new administration, we choose to redefine the definition of employee for a huge chunk of the economy. The proposal also may harm underserved communities stepping into entrepreneurship.

But beyond the substance issues with the proposal, perhaps more important is the need for pro-active reforms to NLRB. The agency has not adapted with the changes in the economy and workforce that have occurred in the century since its creation, and it should.

First, NLRB should establish a core principle of transparency about its processes. There is an important role for NLRB to ensure labor laws are complied with. But the agency has become politicized because so much of its practice and procedures take place behind closed doors. Most American companies seek to comply with labor laws, but often are unaware of significant NLRB activities and decision-making that impact them.

Second, the agency and Congress should complete a comprehensive review of its enforcement activities from an unbiased principle of fairness. There should be no tilt on the scales of adjudication – whether toward worker or employer – in NLRB actions. Instead of an agency that reacts to the party in power, a consistent, fair standard should be advanced giving practical certainty and benefit to the American workplace. Reliable expectations contribute to an industrial stability that will benefit workers and employers alike.

As the “New Deal” era NLRB searches for relevance in the 21st century, it should focus on ensuring transparency and fair enforcement to fit our modern economy.

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