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Latest News - May 2015

May 13, 2015
Is the NLRB's war on franchising not as bad as feared?
By: Kent Hoover

Maybe the National Labor Relations Board won’t be such a threat to franchising after all: In one case at least, an NLRB attorney has determined that a franchising company is not a joint employer with its franchisee.

The case involves Nutritionality Inc., a Chicago franchisee of Freshii, which is a fast-casual restaurant company with more than 100 locations. Nutritionality is accused of unfair labor practices for firing two employees who tried to unionize its work force. NLRB’s regional office found merit in the allegations, but sought advice on whether Nutritionality is a joint employer with Freshii.

The NLRB’s Office of General Counsel advised that isn’t the case here because “there is no evidence that Nutritionality shares or co-determines with Freshii matters governing the essential terms and conditions of employment of Nutritionality employees.”

"At most, Freshii's controls over Nutritionality’s operations are limited to ensuring a standardized product and customer experience,” NLRB Associate General Counsel Barry Kearney wrote.

This opinion came as a relief to the franchising industry, which felt under siege after the NLRB treated McDonald’s and some of its franchisees as a joint employer in complaints alleging they retaliated against employees who participated in wage protests. In that case, the NLRB determined that McDonald’s exercised “sufficient control” over the franchisees to make it a joint employer.

This precedent was seen as a threat to the independence of franchisees and, if applied widely, would make it easier for labor unions to organize workers at large fast-food chains. Plus, this joint employer standard could subject more franchisees to the Affordable Care Act’s mandate to provide health insurance to their employees.

The Freshii case, however, indicates “the NLRB’s Division of Advice still respects the traditional franchise model and that a finding of joint employment is not to be presumed,” writes Michael J. Lotito, co-chair of the Workplace Policy Institute at Littler Mendelson, a law firm that represents employers.

The International Franchise Association agrees the NLRB opinion in the Freshii case is welcome news, but said the agency needs to provide more clarity and transparency in explaining where it will draw the line on when franchisees and franchising companies are joint employers.

Plus, “the legal battle is not over because an advice memo does not have the effect of creating law, the NLRB might still change its position and adopt a new test when a case comes before it, and other federal agencies … do take a more expansive view of who the employer actually is when it comes to franchising,” said IFA President and CEO Steve Caldeira.




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