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Joint or separate? Agency reps weigh in on hot franchise topic
By Beata Krakus on October 23, 2015 at 2:10 PM

NLRB’s Richard Griffin and DOL’s David Weil address joint employer issues at the ABA Forum on Franchising

Joint employer issues have preoccupied many in the franchise field for some time now. So it is no surprise that a session with Richard F. Griffin, Jr., the general counsel of the National Labor Relations Board (NLRB), and David Weil, the administrator of the Wage and Hour Division of the U.S. Department of Labor (DOL) and author of “The Fissured Workplace,” drew large crowds at the 38th annual meeting of the American Bar Association Forum on Franchising.

Joint employer matters have been a hot topic in franchising for several years, and the issue was brought to a point when in the fall of 2014 the NLRB permitted complaints involving employees of McDonald’s franchisees to go forward not only against the franchisees, but also against McDonald’s itself. The ongoing review of the joint employer standard, which goes well beyond just the franchise model, has brought outcries such as that the suggested (and now adopted) new standard is an attack on the franchise model and would lead to the death of franchising.

Griffin and Weil clearly wished to dispel much of the hyperbole and diffuse concerns about their agencies’ current actions as being intended as a death knell on franchising. Weil in particular repeatedly stated that the goal of his division is to increase compliance with wage and hour legislation and nothing more.

While not specifically stated, it appears the Department of Labor perceives working with franchisors as a convenient way of reaching out to a large number of employers — the franchisees — at one time. Weil repeatedly referred to the agreement between the DOL and the franchisor of the Subway franchise system as an example of what his division is trying to achieve. Under the Subway agreement, the franchisor and the DOL agreed that the DOL will be given access to Subway franchisees — for example, at the franchise system’s annual convention — to educate the franchisees about Fair Labor Act compliance. As part of the agreement, the DOL also informs the franchisor if it receives wage and hour complaints regarding its franchisees.

Weil’s part of the presentation should make franchisors feel somewhat better. Griffin, while he clearly wanted to convey a similar message, may not quite have reached the mark. Griffin, as the general counsel for the NLRB, oversees the enforcement of the National Labor Relations Act (NLRA). The potential joint employer issues raised under the NLRA can be far-reaching and are more nuanced than the wage and hour questions. It remains unclear how the newly adopted joint employer standard (read about the newly adopted standard here) will affect franchisors. Griffin highlighted that in his amicus brief submitted in the Browning-Ferris Industries matter (and reported on in this blog post), he had specifically argued for a joint employer standard that would not consider franchisors as joint employers by default. Only if franchisors exercised control beyond that intended to protect the brand would they be joint employers with their franchisees. Griffin spoke at length about how a franchisor’s access to scheduling software could go beyond brand control and interfere with labor relations. Where software combines information about gross sales, employees’ hours and salary levels, that information can be used to maximize profitability, but will also directly impact employee scheduling, thereby affecting labor relations.

Griffin also repeatedly talked about the process of enforcing the NLRA, highlighting that there is no private cause of action and that a complaint can only be brought before the NLRB by the general counsel. Based on what he said, it appears that he would not bring cases against franchisors unless they would control franchisees beyond the types of controls necessary to protect the franchisor’s brand. However, he skirted over the fact that the joint employer standard adopted in Browning Ferris Industries of California is potentially broader than the standard he had argued for. He also never addressed what would be considered too much control. It is obvious that requiring use of the type of scheduling software he described would be too much under the current NLRA joint employer standard, but there is a big grey area between that level of control and simply ensuring that trademarks are correctly used to requiring use of scheduling software. He also didn’t address maybe the most difficult question in this setting: When do software and other tools that a franchisor may make available to franchisees become “required”? If a tool is offered on an optional basis by a franchisor but adopted by a vast majority of franchisees, is it required?

The discussion also covered the types of controls that may not be intended to affect franchisee employees but nonetheless have an indirect impact on them. For example, a franchisor’s control over the franchisee’s real estate may impact franchisee employees’ ability to picket and otherwise exercise their rights under labor laws at their place of employment.

All in all, the message sent by Griffin and Weil was to keep calm and carry on. While franchisors would be well advised to review their system requirements to ensure that they do not inadvertently interfere with their franchisees’ employees and review direct and potential indirect interference, franchising as such is not likely to see increased review by federal agencies.

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