A long-held standard for determining the “joint-employer” status of franchisors and franchisees is under attack.

A controversial National Labor Relations Board decision in August 2015 held that two companies could be considered Joint Employers through indirect and potential control of employees. The split 3-2 decision reverses nearly 30 years of labor law, which held that an employer needed to have actual or direct control over employees.
The previous Standard protected businesses from liability for employees over whom they have no actual or direct control. In adopting the new indirect-control Standard, the NLRB makes employers potentially liable for employees they do not employ.
The NLRB’s initial Joint Employer decisions focused on franchised businesses. Under the Standard that’s been in place for three decades, franchisors and franchisees are two separate businesses. The new Standard makes franchisors potentially liable for employment and workforce actions of franchisees. This robs franchisees of their independence and threatens to permanently and fundamentally disrupt the franchise model.

See: http://www.restaurant.org/advocacy/Union-Organizing

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The DD&M Hospitality Matters Law Blog examines topics and developments of interest to food and beverage groups and other restaurateurs, hotel owners and developers, and private equity and other investors active in the hospitality space, and others with an interest in recent legal and other developments concerning the hospitality space. This blog focuses on New York, but also includes developments from other jurisdictions.

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