The days of holding franchisees solely responsible for labor law violations may be coming to an abrupt end. Recent charges filed by the National Labor Relations Board (“NLRB”) against McDonald's Corporation assert that, through its franchise relationship and use of tools, resources, and technology, McDonald's “engages in sufficient control over its franchisees' operations, beyond protection of the brand, to make it a putative joint employer with its franchisees, sharing liability for [labor] violations.” In other words, if the NLRB gets its way, franchisees may not be the only ones on the hook for violations of labor law.
The level of involvement and control over a franchisee's operations is central to determining whether a franchisor is a “joint employer” for labor law purposes. The NLRB's recent charges against McDonald's underscore the agency's expansion of the control concept to include franchisors who simply provide regimented rules and regulations regarding business operations to their franchisees, but do not exercise day-to-day control over individual employees. The extent of the NLRB's expansion of its joint employer definition may also involve more than just the franchisee/franchisor relationship.
Indeed, a separate case involving waste services company Browning-Ferris Industries of California Inc. will be heard before the McDonald's cases and may change the decades-old standard for determining joint employer status. If the NLRB expands the joint employer standard in Browning-Ferris, it will have a broad reaching effect for several different types of businesses, including those that run on a franchise model, utilize subcontractors or vendors, or obtain workers though staffing agencies, among others.
The outcomes in McDonalds and Browning-Ferris will set the tone for joint responsibility in labor cases and, if the standard is expanded, may subject more businesses to unfair labor practices claims.
Farhang & Medcoff has extensive experience in labor and employment matters, including handling all types of labor disputes and unfair labor practices claims. If you have any legal needs related to your business, please call us.