As restaurant franchisors await the next twist in the six-year battle to keep courts from treating them as co-bosses of franchisees’ employees, a federal labor watchdog indicated yesterday that it’s not going to re-open cases because the definition of “joint employer” has changed again.
The National Labor Relations Board (NLRB) denied a motion to rehear a complaint against McDonald’s and several franchisees that had already been resolved through a board-approved settlement. All parties accepted the deal in part because a change in the interpretation of “joint employer” effectively shielded McDonald’s from responsibility for the allegations leveled against its franchisees. But that interpretation was overturned by a federal court last week.
The motion was filed by the Service Employees International Union and an affiliated group that represents fast-food workers. “The Charging Parties have not identified any material error or demonstrated extraordinary circumstances warranting reconsideration,” the NLRB ruled.
"Today’s ruling is not surprising in the least for a board that has been doing McDonald’s bidding ever since President Trump took office,” Micah Wissinger, the attorney for the McDonald's employees who brought the case against McDonald’s and its franchisees. “We plan to appeal the decision in federal court.”
An appeal of Friday’s decision by the U.S. District Court for the Southern District of New York, a court widely seen as liberal and pro-labor, is also expected. The appeal would be heard by a higher court that’s viewed as more moderate and balanced in handling employer-employee conflicts.
Friday’s decision overturned the narrow determination issued by the U.S. Department of Labor in January of when a franchisor qualifies legally as a joint employer of franchisees’ employees. That interpretation of the joint employer standard essentially held franchisors to be co-bosses if they exert direct control over a staff in such ways as setting schedules, determining pay and hiring and firing. The decision from the Southern District in effect restored an earlier “joint employer” definition that holds a franchisor is a joint employer if it exerts indirect control. Those indirect influences can include such actions as providing franchisees with training materials and operating procedures—routine actions in restaurant franchising.
As joint employers, franchisors could be sued or sanctioned over franchisees’ employment policies and practices. Restaurant franchisors have contended throughout the six-year struggle over the joint-employer standard that they will be routinely dragged into court by disgruntled or bounty-hunting employees if the broader definition should hold.
Because the Southern District Court’s decision is almost certain to be appealed within the 50-day limit for a filing and overturned quickly by court standards, “I don’t think you’ll see a ton of litigation in that window,” said Matt Haller, SVP of government relations and public affairs for the International Franchise Association (IFA), a franchising trade group and a co-defendant in the Southern District Court case. “We think the judge is on fairly shakey ground. We think in a few months the narrower standard could be re-imposed.”
Still, he said, franchisors “should be reviewing their operational manuals and working with their franchisees to see where there could be indirect control. We are for all extents and purposes living under the Obama era joint-employer interpretation.”
Haller said it’s also likely that Department of Labor representatives will work with White House officials to come up with a way to re-instate their narrowed definition of “joint employers.” The NLRB was largely reconstituted by the Trump administration after it took a decided pro-labor turn during President Obama’s tenure.
The board’s decision yesterday coincided with its receipt of a subpoena from a House of Representatives committee that is investigating whether the board has shifted too far in the other extreme and become anti-labor. The NLRB’s alignment with the Labor Department’s definition of joint employer is often as part of the proof.
The NLRB’s core function is to protect workers’ rights to unionize. The subpoena from the House Committee on Education and Labor seeks the release of documents that were provided by NLRB staff members to the sitting directors as aids in their rulemaking and handling of cases.
While that controversy rages on, groups such as the IFA are working to reinstate and perpetuate the narrower definition of “joint employer.” Those parties have pushed for legislation that sets the direct-control standard as law
“It’s a huge priority for us, but [Congressional] leadership controls what is brought,” and the Democatic leadership of the House is not going to let such a measure advance, said Haller. “It’s a piece of legislation with no pathway in sight, unfortunately.”
Instead, the franchising community is looking at court or regulatory remedies. “The saga of the joint employer standard is not over,” said Haller.
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