Franchises, the NLRB’s joint employer standard, and the minimum wage

Last week, the National Restaurant Association wrote about recent activity at the National Labor Relations Board (NLRB):

The NLRB is expected to issue internal guidance soon on whether it will consider McDonalds, USA, LLC as a joint employer in a group of current unfair labor practice complaints against individual franchisees, despite the fact that labor relations in the stores are solely the responsibility of the franchisees. . . .

The NLRB has also made the joint employer standard a focus in a current unfair labor practice complaint the board is hearing against Browning Ferris Industries. The board has asked interested parties to submit briefs on whether the board should continue to adhere to its current standard or adopt a new standard, as well as what should be included in a new standard if one is adopted. The National Restaurant Association joined other industry groups in filing a brief urging the NLRB not to change its joint employer standard.

(Via the Washington Restaurant Association)

The current joint employer standard has been in place since 1984. According to a brief from several groups, including the International Franchise Association and the National Federation of Independent Business,

For the past three decades the Board has determined whether two separate entities are joint employers under the Act by assessing whether they exert such direct and significant control over the same employees such that they “share or codetermine those matters governing the essential terms and conditions of employment . . . .” To make this determination the Board evaluates whether the putative joint employer “meaningfully affects matters relating to the employment relationship such as hiring, firing, discipline, supervision, and direction” and whether that entity’s control over such matters is direct and immediate.

This standard is clear, rational and has withstood the test of time. . . .

An entity deemed a joint employer is saddled with all of the duties and responsibilities required of direct employers under the Act, not the least of which is the duty to bargain with the employees’ representatives. . . . [L]arge-scale franchisors who retain only the control required to protect their brand, trade name and trademark could be drawn into hundreds of collective bargaining relationships where they have little or no involvement with the workplace.

(Citations omitted)

As the National Restaurant Association notes,

Recent moves by the National Labor Relations Board suggest the board wants to throw a wrench into the franchise business model by holding franchisors responsible for labor practices at stores solely operated by franchisees.

This is similar to the classification of individual franchises under Seattle’s $15 minimum wage ordinance: Franchises are on the same phase-in schedule as large employers if they are “associated with a franchisor or a network of franchises with franchisees that employ more than 500 employees in aggregate in the United States.”