For more than thirty years, a line was drawn that differentiated a franchiser and franchisee. The relationship between the two served each other well. Entrepreneurs looking to start a business found security in the franchiser relationship. The franchiser protected the brand and the franchisee made daily business operations thrive.
A recent article in Investors.com describes a National Labor Relations Board (NLRB) determination regarding McDonald's and its franchisees. The NLRB's determination goes against the decade long defining rule that distinguished franchisers from franchisees. Traditionally, franchisees were considered independent owners. For years the NLRB adhered to its standard, which stated:
"To establish joint employer status, there must be a showing that the employer meaningfully affects matters relating to the employment relationship such as hiring, firing, discipline, supervision and direction."
In recent determinations the NLRB has found that the franchiser and franchisee are joint owners. Claims were brought against McDonald's and the franchisees alleging on the part of both entities "discriminatory discipline, reductions in hours, discharges, and other coercive conduct directed at employees in response to union and protected concerted activities,".
The result of this finding holds the franchiser responsible for the actions of the franchisee, which in the long term will probably make business less profitable for McDonald's and therefore less attractive for franchisees. This major shift in NLRB policies favors unions in the ongoing conflicts between unions and independent business owners.
Another case, the International Brotherhood of Teamsters against Browning-Ferris Industries also has been brought before the NLRB. In this issue, Browning-Ferris Industries urges that the NLRB uphold its standard of treating franchisees as independent owners. The outcome of this case will shed further light on the standard and the direction the NLRB is taking with its determinations.
Our attorneys at Stephen Hans & Associates have more than 20 years of experience representing small and mid-sized business in union-related issues.