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Who will get the blame?

A recent labor board ruling causes concern—and uncertainty.

Perhaps McDonald’s franchisees did unlawfully keep their own workers from protesting for higher wages last summer. But should the franchisor—McDonald’s USA—be held responsible for the alleged violation of rights as a joint-employer?

According to Richard Griffin, general counsel of the National Labor Relations Board, the answer is yes. But as of mid-October, he hadn’t explained why, despite a Sept. 30 deadline imposed by the House Committee on Education to provide a “thorough description” of the joint-employer test and a list of the 43 complaints accusing the burger chain’s franchisees of violating workers’ rights.

Suspicion is that a revised joint-
employer test will negatively impact franchising. Where for decades the NLRB had viewed franchisors and franchisees as separate businesses, the International Franchise Association and others believe the agency may now broaden the standard. An indication came last June when the agency agreed with amicus briefs that argued for revisiting the standard, because franchisors have indirect control over franchisees’ “essential terms and conditions of employment,” namely hiring, firing and disciplining. Shortly thereafter, the NLRB ruled McDonald’s could be considered a joint-employer in the aforementioned complaints.

“Well-schooled franchisor CEOs understand the [joint-employer] concept and what’s currently going on,” says Salsarita’s CEO Phil Friedman. “Franchisees get the right to use the Salsarita’s system, but it doesn’t give them the right to break the law.” In other words, they are on their own in their own businesses.

Breaking the law may not even matter, says Houston franchise attorney Richard A. Solomon, now that the NLRB is “looking at all relationships with franchisees.” He warns that franchisor-provided noncompete forms may serve a purpose when signed by managers, who have access to operations manuals. But requiring hourlies to sign them, as some Jimmy John’s franchisees have been doing at the behest of corporate, is “delusional” and unenforceable, he says.

Operators are taking a wait-and-see approach. Friedman’s company isn’t doing anything from a legal standpoint to prepare for any broader definition. “I think the franchise relationship is a good one, and it’s consistent with how franchising works,” he says.

The IFA expects to debut a “special website to inform local franchise business owners and brand companies about the legal situation,” CEO Stephen Caldeira says.

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