NLRB’s Division Of Advice Says Franchisor Not Joint Employer Under Current Or Proposed Tests
The National Labor Relations Board’s Division of Advice has issued an advice memorandum finding that a restaurant franchisor is not liable as a joint employer for its franchisee’s alleged unfair labor practices, either under the NLRB’s current standard, or the new standard proposed by the General Counsel in Browning-Ferris Industries.
The NLRB’s current joint employer standard – a standard that has been in place since the mid-1980s – allows a finding of joint employer status where two separate entities share or codetermine essential terms and conditions of employment for the workforce. Specifically, each must meaningfully influence matters such as hiring, firing, discipline, supervision, wages and scheduling.
The General Counsel has proposed changing the standard to include any entity without whom meaningful bargaining cannot occur because of its influence over the working conditions of the other entity’s employees, or where “industrial realities” otherwise require a finding of joint employer status. This issue has been getting considerable publicity recently, as the NLRB is currently prosecuting a group of McDonald’s franchisees and McDonald’s USA, their corporate franchisor, under a joint employer liability theory, for alleged unfair labor practices arising out of a series of one-day nationwide strikes by fast food restaurant employees.
In Nutritionality, Inc. d/b/a Freshii, the Division of Advice weighed in on a situation where the franchisee, Nutritionality, fired two employees allegedly for attempting to organize a union. The employees filed unfair labor practice charges and the regional NLRB office asked for advice on whether Freshii, as franchisor, was a joint employer for the purpose of those charges.
Freshii provides its franchisees with an operations manual covering topics such as maintenance of the restaurant, sales and marketing materials, staffing levels and appearance, pricing, ingredients and methods of food preparation, days and hours of operation, and other matters. The franchise agreement specifically stated, however, that mandatory standards did not include personnel policies or procedures. Although the Operations Manual contained suggestions on those matters, the franchise agreement made clear those portions of the manual were not mandatory. Regarding training, Freshii contractors conduct initial trainings before a new franchise opens, but beyond that are not involved in training staff. The initial trainings cover food preparation and payment systems, not labor and employment issues. Each franchisee is responsible for hiring its own staff and setting wages.
The NLRB Division of Advice concluded that Freshii was not a joint employer in this case because it does not have any control or influence over the terms and conditions of employment for Nutritionality’s employees. Even when Nutritionality asked for Freshii’s advice on handling a possible unionization effort, Freshii indicated that was a matter solely for the franchisee to address.
The Freshii advice memo should come as reassurance to franchisors closely watching the NLRB as it addresses the General Counsel’s proposed joint employer standard. Since here, the franchise relationship was deemed hands-off enough to avoid a joint employer finding under the current or proposed standards, franchisors may want to check their franchise agreements to see just how hands-off their agreements leave franchisees in terms of determining essential terms and conditions of employment for the franchisee employees.