The National Labor Relations Board, the federal agency that enforces labor laws, may be pulling back from its controversial move to expand the “joint employer” standard for when corporations such as McDonald’s are legally responsible for their franchises’ actions.
In a recent legal memorandum, the board’s general counsel’s office hinted that it will adopt a narrower liability standard than many business groups have feared.
Industry groups remain skeptical, though, noting the board could go ahead with the more radical shifts in policy. “The recent steps could just be a way for the board to lessen the pressure that has built up on the issue,” said Jim Plunkett, director of labor law policy for the U.S. Chamber of Commerce.
Plunkett noted that the two main cases involving the joint employer issue, a labor rights case against McDonald’s Corp. and a related case called Browning-Ferris, have not been resolved.
According to the board’s long-time standards, franchisers and franchisees are legally separate entities and therefore not liable for each other. The board’s general counsel, Richard Griffin, has said it instead should adopt a standard in which a business having “potential control” over another business would make it a joint employer.
Last year, he filed a labor rights complaint against McDonald’s Corp., arguing that it was a joint employer at local franchises that allegedly violated their workers’ rights. The case has attracted major interest from business groups because it could vastly expand legal liability for corporate franchisers.
An advice memorandum issued late last month in a case involving a Chicago-area franchiser called Freshii, suggested the impact of the new standard will be limited.
The memo found that Freshii was not a joint employer and specifically said this was the case even under the broader standard proposed by the general counsel.
Notably, the memo said Freshii was not liable even though it instructs franchisees how to calculate labor costs to schedule its staff. In a speech to West Virginia University Law School last year, Griffin specifically cited this as a reason why McDonald’s was being charged.
The distinction between the two cases appears to be that McDonald’s provided software to its franchisees to manage their staff levels while Freshii did not. Griffin has repeatedly cited the software in connection to the McDonald’s case.
That would suggest that franchisers that don’t use that technology would not be affected under the new standard.
The International Franchise Association, a trade group whose members include McDonald’s, called the Freshii memorandum “welcome news” and attributed the decision to the “immense scrutiny being placed on the … general counsel to disclose his expanded employer theory.”
The association added, though, that the memorandum was just that, not actual policy. “[T]he NLRB might still change its position and adopt a new test when a case comes before it,” it said.
“In essence, it’s good news for Freshii, but it’s essentially meaningless for everyone else and the [general counsel] has duped business before by putting out advice memos and then ruling the other way,” said association spokesman Matthew Haller.
NLRB spokeswoman Jessica Kahanek downplayed any connection between the McDonald’s and the Freshii cases as well as the proposed new joint employer standard.
“To be clear, the general counsel is not pursuing the McDonald’s complaints under a ‘new McDonald’s standard.’ He has stated on numerous occasions, including in congressional testimony, that the complaints issued against McDonald’s involve current board standards for determining a joint employer relationship,” Kahanek said.
