Franchises as Joint Employers-The Battle Continues

On Behalf of | Mar 16, 2015 | Employment Law -- Employer |

While recent National Labor Relation Board (NLRB) decisions have begun to impose liability on franchises as joint employers, there has been a backlash from Congress and the Courts against this legally unprecedented action. In January, a California judge held that the franchise, Massage Envy, could not be held liable for an individual franchisee’s wage and hour violations. This holding follows a recent August 2014 California Supreme Court decision that Domino’s could not be held liable as a joint employer in a former employee’s sexual harassment suit. These cases are directly opposed to the NLRB’s recent decision to hold both McDonald’s and the franchisees accountable as joint employers in labor complaints against the chain.

Robert Cresanti, the International Franchise Association’s (IFA) executive vice president of government relations and public policy, said in a statement. “Should brand companies and local franchise owners, be considered joint employers, it will substantially impact growth and job creation in what promises to be the fastest growing business sector in the US economy.” He also contended that “(t)hese rulings reinforce IFA’s view that recent moves by the NLRB general counsel to broaden the definition of joint employer and make new law run counter to the long-held understanding of the franchise business model and established law.”

Since early February, Franchises such as the Golden Corral, Jamba Juice, College Hunks Hauling Junk and Choice Hotels have lobbied Congress, urging action for fear that the NLRB decision could have negative impacts on their business operations.

Congress has weighed in on the issue. On March 5, lawmakers issued a letter to the NLRB’s general counsel, Richard Griffin. This letter signed by Rep. John Kline (R-Minn.), Senator Lamar Alexander (R-Tenn.) and Senator Ron Johnson (R-Wis.) requested an explanation for the board’s decision to hold franchisors as joint employers in labor violation cases. The letter further inquired that Griffin produce documents and communication over the last few months relating to the joint employer standard. In addition to requesting explanation, the letter expresses concerns that Griffin attempted to hold franchisors liable as joint employers while knowingly lacking legal grounds.

The NLRB’s recent decision has gone against a long history of independent control by franchisees on aspects of employment, such as hiring, firing and wages. The recent joint-employer decisions may have long term effect on the future of the Franchise business model. Both of the Domino’s and Massage Envy cases stand in direct opposing to the NLRB’s McDonald’s decision, causing ambiguity for franchise businesses nationwide