Will NLRB Ruling Make Chain Owners More Hands-on?
Yesterday, the National Labor Relations Board handed down a 3-2 ruling in the case of Browing-Ferris Industries (BFI), which has the potential to significantly alter the relationship between franchise owners, their employees and the franchising corporation.
BFI is a waste management company in Houston, who staffed a recycling center in California with subcontracted employees provided by Leadpoint Business Service. Although BFI didn’t directly hire Leadpoint’s employees, the NLRB (who is responsible for conducting elections for labor union representation and with investigating and remedying unfair labor practices) ruled that BFI nevertheless is a “joint employer” of the staff members.
The NLRB reports that its decision relied on the fact that BFI possessed “direct and indirect control over essential terms and conditions of employment of the employees supplied by Leadpoint” – examples in the decision includes BFI’s control over when recyclable processing lines operated – and, by extension, what shift lengths were and when overtime would be required.
NLRB General Counsel Richard Griffith laid out the logic in an amicus brief he filed in the case, and extended the logic to potentially include franchised businesses. His brief observed that “some franchisors … keep track of data on sales, inventory, and labor costs; track how long it takes for employees to fill customer orders, accept employment applications through the franchisor’s system;” and otherwise “exert significant control over franchisees.”
Griffith argued that since franchisors “effectively control wages by controlling every other variable in the business except wages,” the franchisor should be involved in collective bargaining actions occurring with the franchisee.
Because the ruling redefines the standard by which joint-employer relationships are recognized, employees of an individual franchisee who unionize can potentially bring the corporate franchisor to the bargaining table to negotiate labor and wage issues.
The ruling may still be challenged in court. Indeed, in a press release on the International Franchise Association website, IFA President Steve Caldiera states that “the Board’s tortured analysis will undoubtedly be met with skepticism and will be rejected by local franchise owners, legislators and, ultimately, the courts. IFA and its allies are asking Congress to intervene to halt these out-of-control, unelected Washington bureaucrats to preserve the established joint employer standard relied upon by America’s 780,000 franchise businesses and the 8.5 million jobs they directly create.”
Yet, if the ruling stands, some raise the question of whether the NLRB standard sets a precedent for viewing the franchisor-franchisee relationship in a similar way when settling issues beyond unionization issues – potentially also touching on issues governed by the EEOC, the Department of Labor and OSHA.
If so, the corporate franchisor would also potentially be on the hook for liability when local employees bring suits claiming discrimination, wage and break law violations, or problems with workplace safety.
The Washington Post makes a similar prediction to Caldiera's, writing that
“suddenly, a franchise owner is going to start hearing a lot more from the people running the home office”
about a wide variety of issues, including minimum wage mandates like those recently targeting restaurant chains in New York or the national “Fight for $15” movement.
Caldiera predicts that this expansion could bring an end to franchising -and is quoted as saying “this will clearly jeopardize small employers and the future viability of the franchise model…
If I’m an existing and/or aspiring franchisee, why would I want to expand my business and/or get into franchising if I don’t have the ability to run the day-to-day operations of the business?”
I’m curious what you think. To what extent do corporate franchisors affect wage, labor, scheduling, or other employment issues at franchisee locations today? Will this ruling change that influence in the future?
Please share your thoughts in the comments section below. And if you found this post informative, please let me know by giving it a “thumbs up”!
About: JD Miller is a senior technology executive with a career spanning small startups and large public companies. He uses this expertise to help organizations increase and sustain sales performance. He is also active in Chicago’s philanthropic community, with a special interest in issues related to hunger and homelessness.
You can follow Dr. Miller on Twitter @JDM_Chicago
Excellence with Integrity
9 年No one likes government intrusion in their business. Franchisors do need to pay better attention to the quality of the franchisees. Any franchisee that violates labor laws endanger the entire system. Many times i have seen them turn a blind eye to problems in their franchised restaurant. They hold the franchisees accountable for food safety, they also should hold them accountable for proper labor practices, since both can damage brand reputation.
Strategic Partner Manager @ HPE | Service Providers, System Integrators, Networking Cloud Solutions
9 年This is a attempt to improve wages for those at the lower end lanor through policy. The goal is admirable, however the decision is flawed and short sighted. The way one improves longterm real earnings in a contractor arrangement is through tax policy. All contract laborers should have the ability to deduct major expenses such travel, tolls, fuel, vehicle wear and tear, medical, etc from their taxes without having to form a registered business entity. This would improve real eearnings in the form of tax refunds.
Retired Trades man that has worked in the Safety industry.
9 年Hello I would think there is no entirely correct decision. On one hand the person owning the franchise should be held accountable for policy and conditions of their business. On the other hand the parent corporation must share some of the responsibility if they direct the way business is done. Much like a constructor on a construction project. Just a thought.
Retired Trades man that has worked in the Safety industry.
9 年Hello I would think there are no hard line correct ways to decide this. On one hand the person owning the franchise should be held responsible for the policy and conditions at his workplace. However, like a constructor, I think the parent company is not without unless they supply product only. If they direct the way business is done they must also accept some responsibility.