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The long and complicated history of joint employer

A detailed look at efforts to change the joint-employer standard, and why the debate just won’t go away.
Photograph: Shutterstock

Like the hockey-masked character in a teen horror movie, the joint employer standard feared by restaurants just keeps bounding back. The industry thought it had beaten back the threat at least five times. After Tuesday’s decision by a federal district court, the quest is on for a sixth instance.

Here’s a review of the ups and downs of the last five years.

Dec. 19, 2014

The National Labor Relations Board, the federal agency that protects workers’ right to unionize, rules that McDonald’s could be regarded as a joint employer and hence a co-defendant in litigation brought before the board by franchisees’ employees, a result of reinterpreting the legal standard. The ruling sends a shudder through the restaurant franchise community. Restaurant chains voice fears they will be sued incessantly by disgruntled employees looking for settlements from deep-pocketed franchisors. The franchise industry warns the change in interpretation of the joint-employer standard will prompt many multi-unit operations to cease using the franchise model as their engines of growth. The ruling is believed to be the first time a big-name restaurant franchisor is designated as a joint employer. The high-profile case would continue for five years.

Aug. 27, 2015

The NLRB sends another chill through the restaurant franchise community when it rules that a franchisor need not exercise direct control over franchisees’ staffs to be regarded legally as a joint employer. The ruling essentially makes brand owners liable for any infractions of labor laws or regulations by franchisees.

Sept. 10, 2015

Legislation is introduced in the Senate to protect franchisors from being regarded as joint employers, the first step in a still-underway campaign to resolve the issue legislatively. The bill, co-sponsored by a number of long-tenured Republicans, states categorically that franchisors are not joint employers in most instances.

June 7, 2017

After President Trump takes office, the U.S. Department of Labor (DOL) effectively weakens the broad definition of joint employer by providing new field guidelines for interpreting and applying the standard. The new directives narrow the instances where it applies, the first indication that the Trump administration intends to overturn the rules set by its predecessor.

Dec. 15, 2017

After President Trump appoints new members to the NLRB, the board votes 3-2 to narrow the definition of joint employer. The reconstituted board rules that a franchisor can be considered a joint employer only if it has direct control over a franchisee’s employees and exercises that power through actions such as hiring and firing. The two new constructs replace the previous holding that control can be inferred if the franchisor exerts indirect control through such steps as providing training materials and operational policies. The reprieve would last for nine months.

March 8, 2018

The NLRB reverses an earlier decision by the board that effectively narrowed the definition of joint employer, though not because of any legal re-interpretations. Rather, a three-person subcommittee of the board identified a potential conflict of interest on the part of a fellow director involved in narrowing the definition. The ad hoc review panel declared the redefinition invalid, and the broader definition was restored.

Jan. 30, 2019

The NLRB’s broad definition of “joint employer” is costing franchisors an average of $142,000 annually in legal fees and other expenses, according to research released by the International Franchise Association. The trade group pegs the aggregate cost at $33.3 billion annually, though labor advocates assail the data as inflated and inaccurate.

April 1, 2019

DOL floats its narrowed definition for public comment, airing four specific criteria for the first time. To be liable as a joint employer under the proposed redefinition, a franchisor would have to be involved in hiring and firing franchisees’ employees; setting or supervising work schedules; setting wages and determining the manner in which employees are paid; or maintaining the employees’ records.

June 6, 2019

Eighteen states implore the DOL to halt the adoption of its four-part test to determine when a franchisor is a joint employer of franchisees’ staffs, saying the criteria are too narrow. The letter will be followed by the lawsuit that was decided on Tuesday, more than a year later.

Oct. 10, 2019

A federal appeals court rules that McDonald’s does not exercise enough control over franchisees’ employees to be regarded as a joint employer, adding case-law precedence in support of a narrowed definition.

Dec. 12, 2019

The NLRB issues a directive that effectively dashes assertions that McDonald’s is a joint employer of its franchisees’ staffs. The ruling ends a five-year legal battle that pitted the burger giant and several franchisees against employees who were backed by the Service Employees International Union (SEIU).

Jan. 12, 2020

DOL resets the joint employer standard by airing its four-part test for determining when a franchisor is a co-employer. The revision is hailed by franchisors as a viable defense against bounty-hunter-type lawsuits.

Sept. 8, 2020

The U.S. District Court for the Southern District of New York strikes down the Department of Justice’s criteria for determining when a franchisor is a  joint employer, once again confronting restaurant chains with the possibility of being held liable for franchisees’ employment practices and policies.

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