Will the Joint Employer Rule Hurt Franchises?

Two significant rulings by the National Labor Relations Board in 2015 expanded the interpretation of the “joint employer” rule.  Joint employer is a designation given when two firms are involved in the employment practices of an employee.

In a case involving Browning Ferris Industries, the NRLB ruled that Browning Ferris was not only responsible for those it employed directly, but also contractors and those “indirectly” employed by the firm.  Thus, they would be liable for labor violations committed by contractors even when they have only indirect or unexercised control over employment conditions.

In another case involving McDonald’s, the NLRB denied an appeal by McDonald’s last year, ruling 3-2 that McDonald’s is considered a joint employer and therefore could be responsible for alleged labor violations at its franchises at 30 locations across five states.  McDonald’s has about 2,700 restaurants, about 80 percent which are privately-owned franchises.  This year, the consolidated case goes before an administrative law judge to determine whether McDonald’s corporation will be responsible for the alleged violations as a joint employer.

The real fight here has nothing to do with righting alleged wrongs.  The ultimate goal is a unionized fast food work force.  A ruling against McDonald’s would make it easier for workers to unionize by allowing them to appeal to the parent company for higher wages and negotiate with both the franchise and the parent company.  In fact, NLRB general counsel Richard Griffin admits that the NLRB action against McDonald’s is all about the Service Employees International Union’s “Fight for $15” wage push. (See comments and video here.)

How will this affect the nation’s 780,000 franchises that provide 9 million jobs?  Likely not in a good way.  If parent companies are responsible for every labor decision made by a franchise owner, they will exert more control over franchises, essentially holding them to a broader set of rules that will increase administrative costs and thus make franchises less profitable.

As an antidote to this complete reinterpretation of labor law, Congressman John Kline (R-MN), introduced the “Protecting Local Business Opportunity Act” (H.R. 3459) that would clarify and narrow the scope of the joint employer rule.  A companion bill,  S.2015, was introduced in the Senate by Lamar Alexander (R-TN).  The House bill has gone through Committee on Education and the Workforce and is ready to be voted on by the entire House.  Let’s hope it happens sooner rather than later.

Comments (1)

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  1. bill butos says:

    A new law to deal with a bad NLRB ruling??? No, the better solution is to reign in the NLRB by limiting its bureaucratic powers and, also, to win the Presidency and pack the NLRB with sensible appointees.

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