Employer Status for Franchisors
Franchisors typically do not control hiring, discipline, termination, or other employment decisions made at locations operated by independent franchisees. Can they nonetheless be liable for labor, wage / hour, and other violations, because they impose quality standards, provide training materials, or otherwise control conditions in the workplace?
ACCORDING TO THE NLRB GC…
Yes. The General Counsel ruled that it will allow workers to treat McDonald’s as a joint employer with its franchisees. Although the GC’s ruling was verbal and his analysis has not been published, the decision suggests that a franchisor that does not control day-to-day employment decisions may still be liable for violations if it exercises sufficient control over the workplace and how the franchised locations are run.
WHAT DOES THIS MEAN?
EASIER PATH TO UNIONIZATION
If workers are employees of corporate headquarters, in addition to their local small business, they will be easier to organize. The expansion of the joint employer doctrine is therefore an important ruling for unions trying to organize certain industries, such as fast food workers.
The NLRB’s joint employer test has been relied upon in many jurisdictions to assess liability for wage / hour, discrimination, and other violations against entities that do not technically employ the aggrieved individuals. Thus, an expansion of the doctrine at the NLRB could lead to broader liability for practices over which franchisors have little control.
Without the benefit of the GC’s analysis or the NLRB’s ultimate ruling, it is too early to say what, if any, steps franchisors might take to limit their liability.