Franchise arrangements pose legal problem for NLRB’s proposed joint-employer standard

The National Labor Relations Board’s general counsel, who is recommending that the Board dramatically alter the joint-employer doctrine, admitted that his proposal may run into “a problem legally” when it comes to franchisor-franchisee arrangements.

But franchisors shouldn’t get too excited. General Counsel Richard F. Griffin said that he thinks there may be a way around it, at least in certain cases.

This summer, Griffin’s office submitted an amicus brief to the Board, in a case titled Browning-Ferris Industries of California Inc., Case No. 32-RC-109684, suggesting that the joint employer standard be based on whether two or more entities exercise “direct or indirect control” over working conditions of employees.

That was the joint employer standard until 1984, when the Board held in a pair of cases — Laerco Transportation, 269 NLRB 324, and TLI, Inc., 271 NLRB 798 — that two or more entities will only be considered joint employers if they jointly exercise “direct” and “immediate” control over the terms and conditions of their workforce’s employment, Griffin said.

Griffin said a return to the pre-1984 standard would make it easier for temporary workers to force to the bargaining table companies that contract for their services through a staffing agency.

But it won’t help franchise employees who want to enter into collective bargain with franchisors, Griffin said.

“In that area, we have a problem legally for our theory,” Griffin told the crowd at the West Virginia College of Law. “Prior general counsels have authorized complaints against franchisors, arguing that franchisors were joint employers with their franchisees. But the Board has said no — even under the old test.

“[The Board has] established, essentially, this principle that if the franchisor’s indirect involvement in the terms and conditions of employment comes about as a result of the franchisor trying to insure the uniformity and quality of their brand, that’s insufficient involvement to get them as joint employers,” Griffin said.

Still, there may be a way around this obstacle, said Griffin, who announced in July that he will name McDonald’s USA LLC as a joint employer in dozens of unfair labor practice cases filed by or on behalf of employees of McDonald’s franchisees.

“One thing that came to our attention in the course of a bunch of cases, including the McDonald’s cases, is there is now a lot more involvement in certain contexts of franchisors with the day-to-day operations of their franchisees,” he said. “The reason for that is … the enormous software capabilities that are now present.”

For instance, some franchisors have purchased software that will automatically instruct franchisees to send workers home for the day based on a real time analysis of the franchisee’s gross sales and labor costs.

“That type of involvement in the hours and terms and conditions of employment of employees by the franchisor, we argue, goes beyond protecting the brand,” Griffin said. “In those instances, … we think the franchisor ought to be named and held responsible as a joint employer.”

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