Late last month, NLRB General Counsel Richard Griffin announced that he has authorized issuance of Unfair Labor Practice Complaints based on 43 of the 181 pending charges against McDonald’s, USA, LLC and various of its franchises, in which the Board will allege that the company and its franchisees are joint employers. This decision goes against decades of decisions and case law and could potentially be devastating to the franchise system as we know it. If upheld, the determination would bring McDonald’s (with its deep pockets) to the bargaining table in connection with a wide variety of employment related claims. The financial strength of McDonald’s would make forming a union more attractive to workers. McDonald’s, and other franchise chains, may also have to step up its policing of franchises and spend more time and money monitoring stores to prevent labor infractions.
This announcement comes as the NLRB, in an unrelated case involving Browning-Ferris Industries of California, is reviewing its standard for determining when businesses should be considered joint employers. Traditionally, to establish joint employer status, there must be a right to control. Both legally separate employers must have direction or ability to co-determine the hiring, termination, wages, hours or any other essential terms and conditions of employment. In the Browning-Ferris Industries case, the Teamsters sought to represent a bargaining unit of employees who it claimed were jointly employed by BFI and its staffing agency. The Regional Director, however, determined that the company and the staffing agency were not joint employers with respect to workers at one of the company owned recycling facilities because BFI did not exert sufficient control over the agency workers. The Teamsters sought review of this decision, which was granted by the NLRB, finding this as their opportunity to expand the test for establishing joint employer status. In a very unusual move, General Counsel Griffin filed an amicus brief urging the Board to adopt a new broader standard.
What this means for all businesses: This potential new standard for determining joint employer status may leave more employers liable for alleged labor law violations and potentially force more companies to come to the bargaining table. This possible new standard will affect every business that subcontracts or outsources any function. It seems that it may become futile to try to avoid joint employer status and, instead, companies need to investigate business practices to make sure that any other company they are in business with is doing everything as close to 100% correct as possible. In the alternative, companies may need to explore the option of eliminating the use of certain contractors completely. At a minimum, the company should be sure to include a strong indemnification provision to hold the individual contractors or suppliers responsible for any liability suffered as a result of their noncompliance with legal responsibilities. Of course any such indemnification will be meaningful only if the other party has the financial resources to back it up.
This article is authored by attorney Lori L. Buntman and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice. Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.
