Joint Employment Moving in the Franchisor’s Direction
In a helpful step for franchisors, the National Labor Relations Board voted 3-2 on December 14, 2017,to overrule their prior decision in Browning-Ferris Industries, 362 NLRB No. 186 (2015) (“Browning-Ferris”), and return to the standard that had governed issues of joint-employer liability before Browning Ferris.
Moving forward, parties will be considered joint employers under the National Labor Relations Act (NLRA) if there is proof that one has directly and immediately exercised control over employment terms of another entity’s employees, as opposed to merely reserving the right to do so. Accordingly, as of yesterday’s decision, proof of indirect control, contractually-reserved control that has never been exercised, or control that is limited and routine will not serve as adequate demonstration of a joint-employer relationship. The Board majority determined that the reinstated standard adheres to the common law and is aligned with the NLRA’s policy of promoting stability and predictability in bargaining relationships.
This decision, while positive for franchising, does not mean that franchisors can relax in their treatment of franchisees’ labor practices. Wage and hour divisions of the Department of Labor and their state counterparts are still active in the space. In addition, the NLRB decision does not alter the analysis that underpins vicarious liability generally, i.e. whether a franchisor has exercised such control that they can be held liable for the acts or omissions of its franchisees (which is a theory of liability that pre-dates the joint employment theory). Our advice remains the same in that franchisors should “stay in their lanes” and recognize matters within their control (the marks, system, etc.) and those that are properly the obligation of the independent franchise owner (employment, compliance with laws, etc.).
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