Interesting points from The Economist on franchises and contract work

The Economist writes about contract workers and the NLRB general counsel’s recommendation to treat McDonald’s as a joint employer with franchisees. (More on that here.)

FEDEX, Walmart and McDonald’s are among America’s largest employers. Yet many of the people who drive FedEx’s delivery trucks, staff Walmart’s warehouses and serve McDonald’s hamburgers are not their employees. Instead, they work for subcontractors, franchisees or themselves.

Flexible work arrangements have long been a hallmark of America’s ever-shifting economy. Lately, though, they have drawn more criticism. . . .

Measuring irregular work is hard. Data are spotty; definitions vary. The OECD reckons more than 10% of workers in Japan and most of Europe are on temporary contracts. No comparable data for America exist, although a 2005 tally suggested that 1.8% to 4.1% of workers were on “contingent” arrangements.

If franchisors are determined to be joint employers,

the proposal could reshape the business landscape. Franchising is immensely popular: it enables companies to expand with limited capital and gives entrepreneurs, in return for a fee, access to an established brand with the supporting know-how and marketing. More than 10% of America’s roughly 4m business outlets are franchises, employing nearly 8m people (in 2007, the latest year available). If the brand owner is responsible for all of a franchisee’s employment decisions, what is the point of franchising? Neither party may see value in the arrangement, says Michael Lotito of Littler, a San Francisco law firm.

The magazine makes the good point that these issues are coming up even as current circumstances make non-permanent/non-full-time work inevitable:

Regulatory and court actions may force firms to recraft their relationships with contract and franchise workers, but probably not to scrap them. Obamacare has raised the costs of permanent full-time staff, even as technology such as online task markets and scheduling software offer more flexible ways to hire temporary and part-time workers. America’s labour market is not as polarised as Japan’s or Europe’s, but may be heading that way.