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“Pitched Battle In The Fight Over Joint-Employer Status Rages On”

Franchise Law Insider By Christopher L. Nickels

Hearings recently opened in the National Labor Relation Board’s controversial case accusing McDonald’s and its franchisees of anti-union activity under a joint-employer theory. Those consolidated hearings are set to occur in three locations, New York, Chicago and Los Angeles, with the trial portion likely to start in mid May 2015. The case is being closely watched given the potential to expand liability to franchisors for the employment decisions and obligations of their franchisees and franchisees’ workers.

While that battle is opening, on April 17, 2015, the “Fight for $15” demonstration occurred with some 60,000 workers protesting low-wages. This protest, funded by the Service Employees International Union, is the latest in a series of strikes that began with fast-food workers protesting minimum wages in November 2012, and significantly impacts franchise operators given the minimum wage issue and that movement’s related goal of expanding collective bargaining under the joint-employer doctrine by seeking to require franchisors to bargain with franchisee workers.

Responding to these attempts to expand joint-employer liability, several business groups are going on offense by taking the fight to state legislatures. As originally reported by Bloomberg BNA, the International Franchise Association and the Chamber of Commerce’s Workforce Freedom Initiative are currently lobbying several states, seeking to pass laws establishing that franchisors are not joint employers with their franchisees’ workers. These groups point to recent success in Tennessee, where on April 10, 2015, a bill was signed into law limiting franchisor liability by clearly stating that those businesses are not employers of their franchisees or of the franchisee workers.

Of course, changes to state law will not impact federal law, and will not preempt the National Labor Relations Act, under which the NRLB is pursuing its joint-employer anti-union claims. But state law nevertheless can have a significant impact on franchisor liability. For example, franchisors would be protected from liability for violations of state and local law relating to common employees claims like discrimination and retaliation claims, as well as state wage and hour laws that are more restrictive than the Fair Labor Standards Act.

This flanking maneuver of seeking relief at the state level mirrors that which has been going on for the past couple years relating to the increase in minimum wages. The battle of whether a franchisor is a joint employer with its franchisee is far from over.

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