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Franchise industry turns to Congress for ‘joint employer’ relief

A variety of parties stung by the reclassification of franchisors as joint employers of franchisees’ staffs have formed a coalition to reverse the regulatory change through federal legislation.

Calling itself the Coalition to Save Local Businesses, the alliance includes representatives from the National Restaurant Association, the National Council of Chain Restaurants, the International Franchise Association, the Coalition of Franchisee Associations and the International Council of Shopping Centers.

The group also includes individual franchisees such as co-chairman Matthew Patinkin, an operator of Auntie Anne’s, Red Mango and Jamba Juice restaurants.

"To me, this is not a Republican or Democratic issue.  This is an issue about hard working people retaining their ability to own, operate, and manage their own local business,” Patinkin said in a statement.   “If the NLRB decides to change the definition of who is the employer, it will certainly impact the way I do business, and could have very negative consequences.”

The NLRB is the National Labor Relations Board, a regulatory body with a mandate to protect employees who want to unionize. On Dec. 19, the regulatory body’s general counsel issued his decision that McDonald’s Corp. could be sued along with a franchisee for alleged employee discrimination because the franchisor was a joint employer of the plaintiffs.

The decision reversed a longstanding interpretation of the franchisee-franchisor relationship. Recruitment, compensation and employment policies had been viewed by tradition and by the courts as the exclusive purview of the franchisor.

With franchisors now held responsible for the personnel actions and policies of their franchisees, chains’ home offices fear they’ll be continually dragged into lawsuits by litigious employees looking for deeper pockets.

Franchisors have also expressed concerns about paying for the resources needed to monitor the recruitment and employment practices of franchisees.

The new coalition characterized the actions by the NLRB as overreaching, or going beyond its mandate of being a watchdog of unionization efforts. The group said it would ask members of Congress to support legislation that would define franchisors’ role by statute, taking interpretation out of the situation.

A bill intended to curb overreaching by the NLRB has already been introduced in the Senate, with the support of Majority Leader Mitch McConnell and Labor Committee Chairman Lamar Alexander.

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