Understanding the Challenges of the Recent Joint Employer Rulings

To say that the waters are muddy regarding the National Labor Relations Board (NLRB) rulings on who is and who isn’t a “joint employer” is certainly an understatement.

And for anyone following the joint employer situation in the U.S., it does not look as if the waters are going to clear up anytime soon.

What’s the joint-employer controversy about?

The confusion about this issue is not new, in fact the first employer/joint employer conflict to make headline news involving the NLRB was in July, 2014, concerning McDonald’s and about 30 McDonald’s franchisees. The fast-food giant’s franchisees were accused of using illegal tactics against employees who were protesting for a higher minimum wage. The NLRB found that McDonald’s could be held accountable as a joint employer, along with the accused franchisees, of unfair labor practices against their employees.

The fear about this particular dispute revolves around how the NLRB will finally rule and if it will have major repercussions in the franchise world. McDonald’s franchisees are rightly concerned that if the franchisor is to be considered a joint employer, the franchisees could lose what little authority they have to tweak or alter the franchisor’s master plan for franchisee –employee decisions. On the other side, large franchisors don’t want to be held accountable in legal disputes involving every franchisee-employee conflict. Not surprisingly, the McDonald’s issue is still being fought in the system, and has not been resolved as of this writing.

Grim predictions followed the initial McDonald’s controversy in 2014, and some went as far as to say this could end franchising entirely. It didn’t and franchising continues to be one of the best options for individuals wanting to start their own business in the U.S.

The problem goes beyond McDonald’s

While this controversy is surely the most hyped, due in part to the McDonald’s highly visible brand, there are others in the news as well.

In 2015, a temporary staffing agency in California provided workers to staff a recycling plant for a company named Browning-Ferris. The dispute centered on the unfair treatment of the temporary employees by not only the staffing agency but by Browning-Ferris, the company who hired the staffing agency. The NLRB ruled that Browning-Ferris was indeed a joint employer, and was therefore liable in the complaint against it and the staffing agency.

In May of this year, Dominos, one of the largest pizza franchisors in the U.S. was named as a joint employer in a lawsuit over wage disputes involving company software. Dominos is expected to fight the allegations, but this is indicative of the climate change in employer-employee relationships following the McDonalds ruling and the potential for further lawsuits and labor and wage disputes for both franchises and staffing agencies.

Staffing agencies have been de facto joint employers for decades

According to the American Staffing Association’s latest figures, in the U.S. there are about 20,000 staffing and recruiting companies, which altogether operate around 39,000 offices. Approximately 16 million temporary and contract workers are hired by staffing agencies in the course of a year. The ASA says total staffing and recruiting industry sales accounted for $217 billion in 2015.

Staffing agencies and the workers they provide to U.S. businesses are an integral part of the U.S. economy, and even with the controversy and continuing confusion about who is and who isn’t a joint employer the staffing industry has the most experience with this type of employer-employee relationship.  True it has not always been a smooth process when negotiating with third-party employment agencies, the businesses who hire them and the employees working for the staffing firms, however there has been a lot of give and take between all parties.

Until recently, these relationships have mostly been without the kind of heated national debate we’ve been reading about in the news regarding joint employer/employer/employee disputes brought before the courts and the NLRB. With all the attention also comes a downside: although these issues so far have not caused a major problem, will this controversy affect the franchise business and staffing agencies?

What’s it all about and will the rulings affect franchise businesses?

You could say most of the current controversies are regarding wages and union organization conflicts between workers who are employed by a franchisee or a staffing agency. There are new allegations and cases being brought to the attention of the courts and the NLRB continually and the fact is, nothing has really changed since the unfair labor practices argument was leveled against McDonald’s in 2014.

The basis for all the debates can be traced back to the National Labor Relations Actof 1935, which was established by Congress to “protect the rights of employees and employers, to encourage collective bargaining, and to curtail certain private sector labor and management practices, which can harm the general welfare of workers, businesses and the U.S. economy.” No one can predict if these rulings and court cases will have a chilling effect on franchises or third-party staffing firms. In this volatile and changeable employment climate, the best policy is to watch carefully and be aware of any and all changes and rulings that could affect your business.

Jason Leverant is president and COO of AtWork Group, a national staffing franchisor with more than 93 franchise and company-owned locations.


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