NLRB General Counsel Seeks To Hold Franchisors Liable For Acts Of Franchisees

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In a sweeping departure from existing law, National Labor Relations Board (“Board”) General Counsel, Richard F. Griffin, announced yesterday that he will name McDonald’s USA LLC as a joint employer in dozens of unfair labor practice cases filed by or on behalf of employees of McDonald’s franchisees.  This action seeks to fundamentally alter the contours of joint employer liability which have existed for decades.  If this position is sustained by the Board, the consequences to the franchise industry, and any business utilizing contingent or leased employees, will be dramatic.

Traditionally, a joint employer relationship has been found where two separate entities jointly exercise control over the terms and conditions of employees’ employment.  Active participation in the exercise of control was generally required.  Many expect the General Counsel to now take the position that McDonald’s is a joint employer along with its franchisees because it “indirectly” controls terms and conditions of the franchisers’ employees.  This “indirect” control claim is based on the assertion that McDonald’s dictates certain methods of operation to its franchisees.

McDonald’s called the decision wrong, saying it “changes the rules for thousands of small businesses, and goes against decades of established law regarding the franchise model in the United States.”  The Company said that it has no control over how its 3,000 independent franchisees determine the hiring, termination, wages, hours, or any other essential terms and conditions of employment of its franchisees’ employees.

Making the General Counsel’s action even more striking is the fact that the Board is now considering the parameters of the joint employer doctrine in a separate case titled Browning-Ferris, Inc. (Case No. 32-RC-109684).  Rather than wait for the Board’s decision in that case, the General Counsel has decided to move forward against McDonald’s now.  It seems as though the General Counsel believes the Board’s upcoming decision in Browning-Ferris is a foregone conclusion.  Benesch is representing the National Association of Manufacturers, the National Restaurant Association and others as amici curiae in the Browning-Ferris case.

All franchisees and franchisors, as well as all staffing agencies and employers utilizing leased or temporary employees should immediately seek counsel regarding the impact of the General Counsel’s actions.  This is truly a fundamental change in the application of the joint employer doctrine which will affect thousands of employers.  Benesch will be updating this Advisory in the weeks to come as further developments occur. 

 

Topics:  Corporate Counsel, Franchises, Franchisors, NLRB, Third-Party Liability

Published In: Franchise Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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