Choosing the Right Franchise

New “Joint Employer” Ruling from NLRB

The National Labor Review Board, which ruled that McDonld’s is a joint employer with its franchisees, has handed down another decision which could affect franchisees. In the new ruling, a waste control company was designated a joint employer with the staffing company that provides them with workers.

The waste management company, said the NLRB, is responsible for the staffing company’s violations of labor rules.

Outcry against the ruling from various business organizations, which pointed out that the ruling essentially says that two separate independent companies are here being counted as the same company in terms of their compliance with regulations.

If the staffing company broke the rules, the waste management company also broke the rules, even though the two companies have no deeper relationship than that of a service being provided to a customer.

There is precedent, but it’s hardly identical. For example, retailer Walmart requires its suppliers to make sure the factories they work with follow all labor laws. This decision, made after deaths at a Bangladeshi clothing factory made headlines, doesn’t imply that the Walmart suppliers are joint employers of the oppressed factory workers in Bangladesh. It requires Walmart’s partners to pay attention to the manufacturers they partner with.

The NLRB didn’t say that the waste management company should have turned in the staffing company, nor that they should take responsibility for the companies its trades with. They said the two unrelated companies are joint employers.

Some business organizations are saying that the NLRB is trying to redefine the employer-employee relationship in ways that make it easier for workers to unionize.

The NLRB claims that it is trying to keep up with a rapidly changing world. The traditional employer-employee relationship, in which a single company hired a single worker and took responsibility for that worker from apprenticeship-style training through their pension, is gone. 2.78 million people work as independent contractors, franchises are growing faster than independent businesses, and temp and other staffing agencies (some of which are franchise businesses) employ some 3 million Americans.

The NRLB says that workers now need to be able to negotiate not with their apparent employers, but with the larger company that holds the purse strings, whoever that might be. Unions agree.

So it is no longer necessary for a company to oversee another company’s workers directly. It is enough that they could do so. Subcontractors such as roofers who work with a general contractor to build a house could now be the responsibility of the general contractor when it comes to their workers.They don’t oversee the roofers’ workers, but they could come around the worksite and interfere if they chose to.

Business organizations wonder whether there might be unintended consequences. Franchises have come up in the conversation, of course. If a franchisor could make decisions for a franchisee, even if they don’t, they might leave themselves open for prosecution if their franchisees violate labor laws. And they could be required to negotiate with their franchisee’s workers, and the franchisee would be bound by the decisions they negotiate.

Will franchisors give up franchising because of their exposure under the new law? Will people choose franchises instead of independent businesses in order to share responsibility? Will the whole question just hasten the use of automation in place of human workers?

It’s impossible to say at this point, since the ruling is likely to head for the Supreme Court. We’ll keep you posted.


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