Early this week, Bloomberg BNA presented a webinar titled “The Current State of Joint Employer Law: How Can Both Employers and Unions prepare for the Future?” The three presenters were Barry Kearney, National Labor Relations Board Associate General Counsel for the Division of Advice; National Employment Law Project General Counsel Catherine Ruckelshaus; and DLA Piper employment partner Harriet Lipkin.
Barry Kearney’s participation was significant because the NLRB Division of Advice developed the theory for the issuance of a complaint, absent settlement, alleging that McDonald’s and its franchisees are “joint employers.” In addition, the Division of Advice prepared the amicus brief submitted by the NLRB General Counsel in Browning-Ferris Industries, urging that the NLRB revise and broaden the standard used to determine whether two separate entities will be considered joint employers.
In the Browning-Ferris amicus brief, the NLRB General Counsel wrote that two entities should be determined to be joint employers when they exercise direct or indirect control over working conditions; when they have the unexercised potential to control working conditions; or where “industrial realities” otherwise make the putative joint employer essential to meaningful bargaining.
Notably, Kearney announced that the NLRB will issue a complaint against McDonald’s by the end of October, suggesting that settlement talks have been unsuccessful. Of course, settlement may remain a possibility. Kearney explained that discussions with McDonald’s and the charging party are focusing on the logistics of the trial (or trials).
Kearney also stated that in the event the NLRB revises the joint employer standard, the NLRB General Counsel will likely issue guidance to the NLRB Regional Offices, which will be publicly available. This would be consistent with the NLRB General Counsel’s practice of issuing guidance following the NLRB’s announcement of new legal interpretations.
The timing of the webinar was also significant because it followed last month’s issuance of the NLRB’s decision in an unfair labor practice case in which CNN was found to be a joint employer with its contractor Team Video Services, even though CNN did not directly control employment decisions affecting Team Video Services employees. In CNN Am., Inc., 361 N.L.R.B. No. 47 (2014), the NLRB announced a revised standard for determining when two entities will be considered joint employers. Pursuant to the new standard articulated in CNN, two entities will be determined to be joint employers when they “share or codetermine those matters governing the essential terms and conditions of employment,” and the putative joint employer “meaningfully affects the matters relating to the employment relationship ‘such as hiring, firing, discipline, supervision and direction.’” CNN Am., Inc., 361 N.L.R.B. No. 47 (2014). Importantly, the NLRB rejected the prior standard, pursuant to which a joint employer determination required that the purported joint employer’s control over employment matters be “direct and immediate.” CNN has appealed the NLRB’s decision to the US Court of Appeals for the DC Circuit.
The three speakers engaged in an interesting discussion regarding whether the mere existence of a contract between two businesses may be an indication of a joint employer relationship. Notably, in the NLRB General Counsel’s Browning-Ferris amicus brief, the NLRB General Counsel suggested that the realities of service contract administration may compel joint employer determinations, and that the same may be true for franchisors and franchisees, He explained, “Although franchisors generally claim that they have no influence over the wages franchisees pay to their employees, some franchisors effectively control such wages ‘by controlling every other variable in the business except wages.’ ”
The October 21 webinar closed with suggestions for how employers may prepare for the future. DLA Piper’s Harriet Lipkin noted that in the CNN case, the NLRB recently revised the standard used to determine when two entities will be considered joint employers for labor relations purposes; and in the NLRB General Counsel’s Browning-Ferris amicus brief, the NLRB General Counsel urged a further expansion of the joint employer standard.
Therefore, assuming that franchisors and other businesses wish to avoid joint employer determinations, franchisors and other businesses should consider their business goals and how to structure their commercial relationships to achieve business goals while avoiding involvement in the essential terms and conditions of employment, with specific attention to hiring, firing, discipline, supervision and direction.
Franchisors were reminded that in the NLRB General Counsel’s Browning-Ferris amicus brief, he urged the NLRB to “continue to exempt franchisors from joint-employer status to the extent that their indirect control over employee working conditions is related to their legitimate interest in protecting the quality of their product or brand.” However, it was also noted that the NLRB General Counsel did not offer further guidance to square this comment with his other comment regarding franchisors’ effective control of wages, excerpted above.
We will continue to provide updates on this topic and our Franchise and Employment lawyers are available to discuss and offer advice as this area of law develops.
You may also enjoy our ongoing coverage of joint employer issues on our blog The Labor Dish, such as "Franchisor liability for franchisee employees: damn weasels" and "Why private equity funds face employment risks."