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National Labor Relations Board Decision Impacts Franchises

  • National Labor Relations Board Decision impacts franchisesIn August there was a major, under-the-radar decision. This National Labor Relations Board decision impacts franchises.

    The National Labor Relations Board (NLRB) ruled that companies may be considered joint-employers with their contractors and franchisees. The ruling increases the potential responsibilities of certain companies such as staffing agencies and franchisors.

    The board’s decision pertained to Browning-Ferris Industries (BFI). At its recycling and waste facility in California, the company uses Leadpoint, a staffing agency. As with most staffing-client relationships, employees of the staffing company report to supervisors from Leadpoint, the staffing company. Leadpoint also maintains its own HR department.

    BFI had some indirect control over Leadpoint employees and at times, BFI action led to the disciplining of BFI employees. De to an agreement between the two companies, the staffing employees could not receive a higher pay than the client’s employees (BFI) doing the same job.

    Since the Reagan era, the NLRB maintained that for an organization to be considered a joint employer, it must exercise direct and immediate control over the terms and conditions of employment. These conditions allowed many organizations to avoid liability for labor violations by asserting that they had no real control over employees. The ruling in late August is significant. It broadens the definition of a joint employer. Now a joint employer need only have potential and indirect control over employees.

    BFI had this level of control. As a result the NLRB ruled that it was a joint employer with Leadpoint. The ruling increases the potential responsibility of certain companies. Sectors this ruling impact are franchisors and companies relying on staffing agencies.

    How the National Labor Relations Board Decision Impacts Franchises

    This ruling could lead to increased unionization. While the full ramifications with this ruling are not fully understood, Republicans in Congress introduced a bill earlier this month to reverse this policy.

    Representatives Senator Lamar Alexander and John Kline, who both chair the committee dealing with labor issue, released a joint statement: “The board’s effort to redefine the idea of what it means to be an employer will wreak havoc on families and small businesses across the country.” They added: “Our common sense proposal would restore policies in place long before the NLRB’s radical decision, the very same policies that served workers, employers, and consumers for decades.”

    Most concerning is the impact this will have on business people who own or want to buy a franchise as stated by Senator Johnny Isakson: “Changing the joint-employer standard will impede franchising by taking away the benefits of a small entrepreneur being able to start a small business and grow it using a brand name that was established by a major corporation.” He continued: “If you take away incentives for corporations to franchise, the result will be similar to what we have already seen in so many oversteps by the Obama administration and the NLRB.”

    Groups lobbying against the NLRB’s decision include the coalition to Save Local Businesses, International Franchise Association and the Competitive Enterprise Institute (CEI).

    For the unions, they view this as an easier way to unionize franchises. Because how the National Labor Relations Board Decision impacts franchises, the workers can organize at the national level and not have to unionize each and ever franchise as a separate entity.

    We will keep you up to date on this issue and the impact it will have on business and franchise owners. To further assist you we put together the critical documents you need when hiring employees. Download our FREE EBook: Why Employee Documents Matter / New Employee Hire Checklist.

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