President Trump has provided the franchise industry long sought relief from an Obama administration ruling that has beleaguered the industry for the past several years. In the 2015 Browning-Ferris Industries of California, Inc. decision, the Obama administration, NLRB Board overturned years of precedent by stating that to be considered a joint- employer, a company would not need to have direct and immediate control over the employment of its workers. In the Browning-Ferris decision, the NLRB said joint employment could also exist when companies have only “indirect or unexercised control” over workers. Under this NLRB ruling, the rule was relaxed whereby, the sharing and supervision of franchise employees could be interpreted more broadly.

Joint employment is the sharing of the control and supervision of an employee’s activities among two or more business entities. For example, about franchising, it would mean that McDonald’s would share the hiring and supervision of franchise employees with its franchisees. Which it does not do.

The issue of a joint employer has been a major concern for franchisors. The rule was one of the regulations enacted during the Obama administration that President Trump wanted to eliminate. The International Franchise Association and many franchisees have been lobbying since the 2015 ruling, to have the NLRB reverse that decision. A major area of concern was that the ruling could invite a deluge of lawsuits and claims against franchisors and franchisees and create uncertainty throughout the entire franchise industry.

For example, McDonald’s was a target of the giant SEIU labor union since a company found to be a joint employer under the Obama NLRB decision, could be required to bargain with unions and held liable for labor law violations by, its franchisee’s employees. A trial with McDonald’s over the joint employer issue that started over 2-1/2 years ago could be ended because of the new ruling.

 

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