What is the definition of a “joint employer?” That question is at the heart of two recent government opinions that are seemingly at odds. The National Labor Relations Board recently released a memo stating that fast-casual restaurant chain Freshii does not qualify as a joint employer with its franchisees. However, just last December, the board issued complaints alleging unfair labor practices by fast-food behemoth McDonald’s and classifying it as a joint employer, according to Franchise Times. What’s the difference in these two apparently similar cases?
The Freshii case
In the Freshii case, the NLRB found that the chain didn’t play a significant role in human resources issues like discipline, hiring or firing employees of franchisees, Entrepreneur notes. In its “advice memorandum” of April 28, the NLRB states that Nutritionality, Inc., has owned and operated just one Freshii store in Chicago since 2011. In 2014, Nutritionality fired one worker and disciplined, then fired, another for trying to form a union. Freshii does provide some information and guidance to franchisees regarding employees. For instance, an operations manual includes advice on hiring and scheduling, a sample hiring ad, sample interview questions and suggested personnel policies. However, Freshii does not mandate that its franchisees follow its advice or use the information. In addition, individual franchise owners have exclusive responsibility for hiring their staff members and are solely responsible for setting wages and determining benefits.
The McDonald’s case
Last July, the NLRB sparked controversy in the franchise industry when it classified McDonald’s as a joint employer that should be held responsible in labor issues, Entrepreneur reports. The board’s decision came in the form of complaints of unfair labor practices in 43 cases against McDonald’s USA, LLC, and its franchisees, Franchise Times notes. NLRB hearings are ongoing, with a final decision expected next year. The board found merit in claims of alleged unfair treatment of workers, including reducing hours, using discriminatory discipline practices and engaging in other conduct meant to coerce employees who were involved in protected union-organizing activity.
How do the two cases differ?
The key difference in the two cases is that McDonald’s allegedly participated, along with franchisees, in retaliation against employees who played a part in protests over wages. The NLRB found that McDonald’s held “sufficient control” over franchised stores to classify it as a joint employer, The Business Journals reports. The NLRB’s general counsel has stated that if the involvement of a parent company impedes workers from bargaining with their employers, the franchisor should qualify as a joint employer and be held responsible along with the franchisee, Entrepreneur notes. The board felt that the Freshii case did not meet this standard but that the McDonald’s case did.
Future of the “joint employer” standard
While the definition of a “joint employer” has yet to be fully settled, the NLRB memorandum in the Freshii case provides insight into a possible future evolution of the term. The NLRB’s general counsel has pointed out a need to use the “totality of the circumstances” to determine joint-employer status; next year’s expected ruling in the McDonald’s case should shed further light on the issue.