Franchisors Beware: NLRB Seeking to Super-Size Joint Employer Liability

The National Labor Relations Board’s (“NLRB”) General Counsel’s Office has again signaled its commitment to expanding the scope of the current test for joint employment. In a move that could have implications for a broad array of franchise relationships, on December 19, 2014, the General Counsel of the NLRB announced that it has issued complaints against both McDonald’s franchisees and McDonald’s USA, the franchisor, as a joint employer. The decision to name McDonald’s as a respondent is consistent with the General Counsel’s recent advocacy that the current joint employment standard is too narrow.

As this blog reported back in May 2014, the NLRB asked for amicus briefs in Browning-Ferris Indus. of California, Inc., Case 32-RC-109684 (May 12, 2014), to address whether the Board should maintain the existing joint employment test, or expand it. Although the Board has not yet decided that case or whether to expand the current standard, the General Counsel’s amicus brief argued that the Board should not adhere to the current joint-employment standard because it is inconsistent with the principles behind the National Labor Relations Act.

According to the General Counsel, the Board should abandon the test in which the essential element is whether a putative joint employer’s control over employment matters is “direct and immediate,” and in which the Board looks to the actual practice of the parties – as opposed to potential, contractually retained control. The General Counsel also urges the Board to eschew the current standard’s requirement that a joint employer exercise “substantial” instead of merely “limited and routine” control over employees.

The General Counsel’s position is that joint-employment status should be determined based on the totality of the circumstances, “including the way the separate entities have structured their commercial relationship” to determine whether the putative joint employer “wields sufficient influence over the working conditions of the other entity’s employees such that meaningful bargaining could not occur in its absence.” As if this new proposed standard were not nebulous enough to make it difficult for companies to determine their joint-employer status, the General Counsel also argues that indirect control and even “potential control” should be deemed enough to meet the new joint-employment standard.

It is likely that the General Counsel will continue to advance these positions in the complaints against McDonald’s. An adoption of this new standard by the Board, or any new broader standard, will likely impact other franchisors and potential joint employers. Franchisors should consider consulting with counsel about their franchise agreements and the current structure of their relationships with franchisees.