NLRB GC Files First Lawsuit Against Franchisor as Joint Employer

As expected, the National Labor Relations Board's Office of the General Counsel has filed an unfair labor practice complaint against a franchisor and some of its franchisees as joint employers. The Board first announced it might take action against McDonald's USA LLC for alleged actions of its franchisees in July of this year. 

It is expected that the Board will soon issue a decision in a related case, Browning-Ferris, in which it will likely adopt a new standard for determining joint employment. For more than 30 years, the Board has considered an entity to be a joint employer with another if that entity exerts a significant and direct degree of control or co-determination over the other entity's employees and their essential terms and conditions of employment. NLRB General Counsel Richard Griffin has taken the position that the current standard should be scrapped and replaced with the pre-1984 standard. Under this "traditional" theory, an employer was considered a joint employer if it "had the potential" to control such terms and conditions of employment, or if "industrial realities" otherwise made it an essential party to meaningful collective bargaining. This expanded joint-employer stance aligns with the theory set forth by DOL Wage and Hour Administrator David Weil that a "fissured" workplace leads to greater labor and employment law violations. 

If the imminent Browning-Ferris decision adopts the General Counsel's position, the franchise model will no doubt be put in jeopardy. Even Browning-Ferris aside, the General Counsel's announcement that a franchisor will face liability for the actions of its franchisees will affect decades of established law and business relationships.  The Board's 1968 decision in The Southland Corporation clearly held there was no joint employment liability in the franchisor industry.  It is unclear how the Board will address this apparent conflict. What is certain is that the franchise industry as we know it must prepare for significant changes ahead.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.