Franchising & Distribution Law Blog

The National Labor Relations Board (NLRB) on Jan. 25, 2019, overturned its 2014 ruling in FedEx Home Delivery and returned to its long-standing independent-contractor standard. In affirming its reliance on the traditional common-law employment classification test, the board clarified how entrepreneurial opportunity factors into its determination of independent-contractor status.

Most franchisors will be happy to hear that the NLRB on Dec. 14 nixed the Browning-Ferris expansion of the joint employer doctrine, which has been of concern to the franchise industry for several years. The new case is Hy-Brand Industrial Contractors, Ltd. and Brandt Construction Co, 361 NLRB No. 156 (Dec. 14, 2017). Even though the board held that Hy-Brand and Brandt are collectively joint employers for purposes of the National Labor Relations Act, the joint employer standard applied is a significant departure from the Browning-Ferris standard.

Reversing course from more than 30 years of precedent, the National Labor Relations Board significantly expanded its standard for determining when two entities constitute a single joint employer over a unit of employees. In so doing, the NLRB creates questions about a number of entity relationships such as parent corporation/subsidiary, contractor/subcontractor and franchisor/franchisee relationships.

Today the Office of the General Counsel of the National Labor Relations Board (“NLRB”) took its next step in the investigation of labor practices within the McDonald’s franchise system and issued consolidated complaints against McDonald’s franchisees and the franchisor – McDonald’s USA, LLC on the theory that the franchisor is a joint employer with its franchisees. Consistent with General Counsel’s amicus brief in the Browning-Ferris matter that was filed this summer, the focus of the complaints appear to be on the use of technology and tools that allows franchisors insight and potential control over franchisee operations.

In a decision that could have far-reaching legal implications for franchisors, on July 29, 2014, the General Counsel of the National Labor Relations Board (“NLRB”) ruled that McDonald’s was a joint employer of its franchisees’ employees. This decision stems from allegations that McDonald’s and its franchisees violated employees’ rights following protests pertaining to wages and working conditions.