New joint employer definition is proposed

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A redefinition of joint employer that provides more protection for restaurant franchisors will be proposed tomorrow by the National Labor Relations Board (NLRB), potentially ending a nightmare for the franchise community—at least for now.

The NLRB said it will narrow the definition to apply joint employer status to franchisors only in instances where they exercise “substantial, direct and immediate control” over the personnel policies and practices of franchisees. The new language is intended to protect franchisors from being held liable in court for the illegal personnel actions of their licensees.

As the result of a long and sometimes bizarre string of legal decisions and NLRB rulings, franchisors today can be sued or subjected to regulatory action along with their franchisees if the latter’s employees allege violations of federal employment rules. That vulnerability had led to warnings that restaurant franchising would grind to a halt, the result of chains fearing a sharp upswing in litigation.

In addition, the industry feared the standing definition would help labor groups unionize restaurant chains by tarring big corporations such as McDonald’s or Domino’s for the infractions of local franchisees. By making the brands the villains instead of some mom-and-pop operator, unions could turn the opinions of employees and the public decidedly in their favor.

The chilling effect was already being deeply felt by franchisors, the International Franchise Association (IFA) told Restaurant Business earlier this year. It called a redefinition of the joint employer standard the franchise community’s No. 1 priority.

“The NLRB’s announcement is good news for franchises and franchise employees across the country,” IFA CEO Robert Cresanti said in a statement.  “Franchise owners have been confused about the vague and uncertain legal minefield created by the NLRB joint employer standard since it was expanded in 2015.”

But the IFA and other groups representing restaurants have professed they’d prefer a legislative redefinition over a regulatory change.

While the former is set and difficult to overturn, requiring an action by Congress, a rule can be altered by whatever political party controls the executive branch. Every time there’s a switch from Democrats to Republicans, or vice-versa, the rule on joint employer could be adjusted in accordance with the labor stances, they contend.

Indeed, the scope of the legal term was broadened by the NLRB while that agency was controlled by appointees of President Obama. It was altered when President Trump took office and shuffled the board—only to be replaced by the older definition because of a court ruling on how the redefinition was approved, and not on the language itself.

The NLRB said it will publish the new definition of joint employer in tomorrow’s federal register, the usual first step in changing regulatory language. Typically, the public is invited to provide comments, positive and negative, on the proposed change. That information is then weighed by the relevant government agency before a final new rule is issued.

“We look forward to participating in the public notice and comment process in the coming days,” the IFA’s Cresanti said.


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