Cook County Record

Wednesday, January 29, 2020

'Joint employer' status in franchise operations could see change in regulation under Trump

By Giovanni Whaley | Nov 29, 2016

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With the arrival of a new presidential administration in Washington, D.C., franchisers and their advocates are hopeful the push by the Obama administration to change the way the relationship between franchisers and franchisees are regulated will be tossed out, as well.

“The good news is that the days are numbered for the NLRB's harmful approach to joint employer," said Michael Layman, vice president of regulatory affairs at the International Franchise Association. "But it will take time to fix what the Obama NLRB has done to locally owned businesses. Small businesses and franchisees need Congress to enact a joint employer solution in the new year.”

In recent years, fast food companies and others whose business is heavily invested in the franchise model have come under the gaze of the National Labor Relations Board, which has launched a regulatory effort to classify employees of individual franchisees as "joint employees" of the larger parent company. 

The NLRB effort first targeted McDonald’s in 2014, after fast food workers took part in nationwide strikes demanding an increase in their pay. The NLRB said it was investigating allegations of unfair labor practices at the world's largest fast food purveyor.

McDonald’s workers alleged in published reports that they were threatened, penalized and fired by franchise operators for participating in the protests. This ultimately led to labor unions filing complaints with the NLRB asking that McDonald’s be held jointly liable with its franchisees for labor violations and collective bargaining decisions.

The NLRB ruled McDonald’s could be held jointly liable for its franchisees' actions, and that ruling was followed by a string of court actions and subpoenas seeking documents and records detailing the hiring and staffing practices at McDonald's and its franchisees. McDonald’s argued the documents in question contained sensitive material and that the NLRB’s subpoena was “overly broad and excessive.” A federal judge did not agree with the company and ordered it to give the NLRB what it was asking for.

The impact of the call for “joint employer” status in this case against McDonald’s is already being felt. The online retail giant Amazon, for instance, has recently been targeted by a class-action lawsuit involving two former employees of a trucking operation that works with Amazon, who allege the company failed to give them overtime pay.

While federal regulators are seeking to possibly expand the “joint employer” status to companies across the country, their actions may not hold up under President-elect Donald Trump’s administration. Trump’s hotel in Las Vegas was accused of discriminating against union organizing, according to Time. Management at the hotel allegedly fired a union supporter and promoted workers who refused to support the union. The hotel reached a settlement in that case.

Vice President-elect Mike Pence also has a record favoring right-to-work laws and other measures opposed by labor unions. 

The International Franchise Association represents franchisees in the U.S. and around the world. IFA believes Trump and a Republican-controlled Congress will help champion the rights of franchisees and entrepreneurs across the country by stopping the possible harmful effect of the NLRB’s actions, said Layman.

“We do expect Congress to act on joint employer next year," Layman said. "Big corporations have driven small businesses out of Main Street for years. Today, technology and regulatory compliance make it even harder for mom-and-pop shops to compete against businesses with more resources.”

Many entrepreneurs look at franchisees as an opportunity to own and operate their own businesses the way they want. 

“Joint employer” status could compel corporations to exercise more oversight of their franchisees' day-to-day operations, which may take away some entrepreneurial liberties.

“By making franchise brand companies liable for employment decisions they have nothing to do with at the franchise restaurant or store, the NLRB wants brand companies to curb franchising and instead run their own corporate stores. 'Joint employer' is designed to make big companies bigger, and drive locally owned franchise stores out of business,“ Layman said.

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Organizations in this Story

National Labor Relations BoardMcDonald's CorporationInternational Franchise Association