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NLRB ruling puts most restaurants at risk

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Restaurant franchisors have been cursing the complication their lives were given last month by a regulatory decision that could hold them liable for the employment practices of franchisees. But if any other type of restaurant operation thinks it’s unaffected by the National Labor Relations Board ruling, it could be tragically mistaken.

What types of restaurant businesses could potentially be affected? Any one that uses an outside security firm, a temp employment agency, a third-party valet operation, a cleaning service or other contracted labor provider, according to legal experts digesting the decision.

“Even franchisees have their own joint-employer issues because they use contracted labor,” says Maury Baskin of Littler Mendelson, a Washington, D.C.-based firm that specializes in employment law. “With the new definition of ‘joint employer,’ the responsibilities downstream [for a restaurant] can be as great as the responsibilities upstream.”

The NLRB ruling came in a longstanding legal action brought by a union against Browning-Ferris Industries, a waste management company that used employees on a contractual basis from a personnel agency called Leadpoint.

The union, a Teamsters local, argued that BFI was technically an employer of the temp workers along with Leadpoint because it exerted influence indirectly on fundamentals of their jobs. For instance, it could seek to get someone fired if they drank on the job or didn’t perform to minimum standards.

If BFI was the workers’ joint employer, couldn’t the staffers then bargain collectively with the waste company, as they can with Leadpoint as members of a union?

The question pivoted on how much influence or control BFI exerted on Leadpoint’s employees. The NLRB decided it had virtually none—directly.  But, because of stipulations set in the arrangement with Leadpoint, it had some indirect control.

Therefore, said the NLRB, it was regarding BFI as a joint employer.

Restaurant franchisors reacted to the big implication: Couldn’t they be regarded as joint employers of franchisees’ staffs, and hence liable for the licensees' employment actions?

But lost in all the analyses afterward was the simpler upshot: Anyone who contracts for outside labor or services could be regarded as a joint employer.

It’s not an unfounded concern. Baskin advises franchisees or any restaurant operator who uses contracted labor to study the contract and modify any language that could be construed as giving it indirect control.

But, he admits: “That’s not always possible in a business-to-business relationship without changing some of the fundamental aspects” of the interactions.

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