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Franchisors ‘can be very comfortable’ in wake of NLRB reversal Zolnierek/iStock/Thinkstock

Franchisors ‘can be very comfortable’ in wake of NLRB reversal

Attorney says joint-employer ruling returns stability to industry

The National Labor Relations Board’s reversal Thursday of its 2015 joint-employer ruling sent relief through the franchisor-franchisee community. The reversal will likely impact restaurant industry cases in the courts, an expert said Friday.

The NLRB, in a 3-2 decision Thursday, reversed a ruling that had made it easier for unions and workers to hold companies accountable for practices of contractors and franchisees.

The board, which has two new members appointed by President Donald Trump, reinstated a pre-2015 test that deems companies as “joint employers” only if they exercise direct control over workers.

In the wake of the original 2015 Browning-Ferris Industries Inc. decision that was overturned, the NLRB had filed complaints against McDonald’s Corp. with the claim it was a joint employer with its franchisees. More than 80 percent of McDonald’s 36,000 restaurants are operated by franchisees.

"The NLRB ruling is significant and reaffirms decades of established law regarding joint employment. The franchise model in the United States creates economic opportunity, jobs and income for thousands of business owners and their employees. McDonald’s USA simply is not a joint employer with its franchisees," McDonald's said in an emailed statement. 

Mark Kisicki, a lawyer who represented Browning-Ferris in the NLRB proceedings, said in an interview that franchisors and franchisees “can be very comfortable going forward.”

Kisicki, a lawyer and shareholder with the firm of Ogletree, Deakins, Nash, Smoak & Stewart P.C., said the NLRB ruling was profound “in the sense it returns us to the decades of board law under which much of our current economy has been structured.”

That long-standing employer test had predictable outcomes, he said.

Kisicki said he could not comment on how the ruling would apply in the McDonald’s Corp. cases. But in general, he said, “We will see general reconsideration by the [NLRB] general counsel’s office in what efforts it will take to prosecute unfair labor practice claims. … We will see some significant changes over the next six months.” 

In June, the U.S. Labor Department withdrew its informal guidance on joint employment and independent contractors, which was seen as a first step in rolling back enforcement of the controversial NLRB decision. Franchisor groups welcomed that move.

Thursday’s NLRB reversal was praised by restaurant industry and franchising groups.

“The 2015 Browning-Ferris ruling stacked the deck against small businesses and inserted uncertainty into day to day operations,” said Cicely Simpson, the National Restaurant Association’s executive vice president for public affairs. The decision “restores years of established law and brings back clarity for restaurants and small businesses across the country,” she said.

Matt Haller, the International Franchise Association’s senior vice president of government relations and public affairs, said the 2015 ruling had caused “needless confusion and uncertainty for America's 733,000 franchise businesses and 7.6 million employees.”

Haller said the board majority agreed with U.S. House members who voted last month to a new joint employer test in approving the “Save Local Business Act,” for which restaurant franchisors had testified in favor of this past summer.

“We urge the Senate to act swiftly to codify this direct control standard so the franchise sector can remain the job creating and economic opportunity generating powerhouse that it has always been,” Haller said.

However, some members of Congress criticized the NLRB reversal.

Rep. Mark Pocan (D-Wis.) said in a Twitter post that the decision was “just another example of putting corporate interests/wealthy donors before working families.

Kisicki, the Browning-Ferris lawyer, however said the decision provides stability in the franchisors.

“We have not just returned to a normal standard that we all understood and applied — and their business model was created under — but they should take some comfort in knowing the board majority in the decision yesterday did a very good job of grievance analysis and thorough exegesis of the statutory law,” Kisicki said, including the legislative history and court interpretations.

Kisicki said a future board might try to chip away at the ruling for reversal, but it would be difficult to go as far as the Browning-Ferris case again.

“Because of that,” he said, “there’s a level of certainty for the franchisor-franchisee community that is very important when you are concerned about protecting your brand and articulating rules to make sure that happens.”

Correction: Dec. 18, 2017  This story has been updated with a statement from McDonald's Corp. 

Contact Ron Ruggless at [email protected] 

Follow him on Twitter: @RonRuggless 

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