Last week, in a landmark ruling the National Labor Relations Board (NLRB), determined that the long standing position that companies only qualified as joint-employers of workers hired by another business if that company had “direct and immediate” control over employment matters, was outdated. The new NLRB ruling states that companies can be held liable for labor violations committed by franchisees and contractors even when they have “indirect” control.
The decision was focused on the relationship between a staffing agency, Leadpoint Business Services, and a customer, Browning-Ferris Industries of California, that hired Leadpoint to provide workers for a recycling facility that it operates. The board decided that Browning-Ferris exerted enough control over Leadpoint’s workers to qualify as a “joint employer.”
There are some in the business world who are already in panic-mode. But there are a couple of hitches to this decision. First, the labor board’s decision is a complex one that is likely to face legal challenges. If that happens, it will be a while before it is actually enforced. Second, the ruling, as it stands now, does not really mention franchises at all. This ruling was very narrow in scope and may not have implications for franchise businesses. In fact, there was a footnote by the dissenters that basically said this case should not be applied to the typical/traditional franchise model. Nevertheless, the decision on whether franchises are considered “joint-employers” is still very much up in the air.
At this moment in time ,now the NLRB is separately litigating a case against McDonald’s, holding it liable as a joint employer for the actions taken by some of its franchisees. However, in another recent franchise case, the NLRB decided that the salad chain Freshii did not exert enough control over one of its franchisees to be considered a joint employer. Two factors the board cited in its decision were that Freshii provided its franchisees with an employee handbook but did not require them to use it, and it did not require all of its operators to use identical computer software for ringing up sales.
So what is a franchisor to do now?
The simplest answer is to take stock of your franchise now. Figure out how much liability you may have if a problem arises with a franchisee. It might also be a good idea to revise your Operations Manual and adjust some language in your franchise agreement to remove language that might invite scrutiny. Franchisors that do not wish to be considered “joint-employers” should focus on controlling the quality of customer deliverables , but leave specific processes out.
Again, this summer’s decision does not equal change right now. It is likely to face legal challenges in the future. But that doesn’t mean franchisors can’t take precaution now. Visit our contact page to find out how you can protect your franchise.