Perhaps you have heard the buzz and fear surrounding franchising joint employment. Under a recent NLRB action, franchisors could be deemed per se the ‘Employer’ of franchisee employees. This designation of the franchisor as an ‘Employer’ of franchisee employees has serious consequences. If, in fact, franchisors are considered the ‘Employer,’ the franchisor would be liable for franchisee wage and hour violations and perhaps many other employee liability claims.
How can this be? In a recent NLRB decision, it is all about sharing, collaborating, and codetermining. In a footnote to the NLRB decision is says:
In some cases [or as to certain issues], employers may engage in genuinely shared decision-making, e.g., they confer or collaborate directly to set a term of employment. See NLRB v. Checker Cab Co., 367 F.2d 692, 698 [6th Cir. 1966] [noting that employers ‘banded themselves together so as to set up joint machinery for hiring employees, for establishing working rules for employees, for giving operating instructions to employees, for disciplining employees for violation of rules, for disciplining employees for violation of safety regulations’].
Think about this.
- Many Franchises have online worker application portals which offer a machinery for hiring employees.
- Franchisor provides initial and ongoing training class to franchisee managers and perhaps franchisee employees.
- Franchise manuals provide rules and instructions for franchised business operations.
Training and franchise manuals are essential for teaching, setting out brand standards, and ensuring brand uniformity of franchise product and service offers. Online applications and other employee assistance tools make franchise operations efficient and competitive. Yet these items can be used as a weapon against franchisors in the joint employment argument.
In order to restore the balance in the joint employment argument, a bill has been in to congress. It is a short bill. But, it has the potential to restore balance. The House of the Representatives’ bill referred to as The Protecting Local Business Opportunity Act [H.R. 3459, S. 2015] states:
‘Notwithstanding any other provision of this Act, two or more employers may be considered joint employers 2 for purposes of this Act only if each shares and exercises control over essential terms and conditions of employment and such control over these matters is actual, direct, and immediate.’
The Bill takes collaborating and codetermining out of the joint employment decision. In essence, it returns the joint employer determination back to before the NLRB decision. Going back to government 101, the NLRB is part of the executive branch of government charged with enforcing statutes enacted by Congress. If the Bill is pasted, the NLRB is bound to adhere to the standard set out in the Bill. This is so dictated by the separation of the powers and checks and balances innate to our form of government.
Regardless of current state of the law, the joint employment is a real concern for franchisors. Being considered a joint employer can expose Franchisors to liability for wage and hour overtime violations, employee discrimination claims, and third party claims of negligent hiring and supervision.
For more information about how to avoid joint employment, email us for a copy of White Paper: 5 Steps to Avoiding Joint Employment at [email protected].
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