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Franchisors beware

August 18, 2014

Last month, the National Labor Relations Board (Board) announced that its Office of the General Counsel intends to name McDonald’s USA, LLC, as a “joint employer” in numerous cases in which complaints have been authorized against McDonald’s franchisees. The NLRB’s decision to pursue cases against McDonald’s USA as a joint employer is a wake-up call for franchisors.

Franchisors are generally considered separate employers from their franchisees. By seeking to charge McDonald’s as a joint employer, the Board is stating that McDonald’s as a franchisor is involved in the labor relations of its franchisees to such an extent that it exerts direct and immediate control over the essential terms and conditions of employment of the franchisees’ employees. The facts behind this determination have not been announced.

The announcement is a call to action for franchisors to take steps to evaluate the potential for joint employer liability. Franchisors need to review their franchise agreements and more importantly, need to conduct a realistic assessment of their relationship with franchisees. From that review, a risk assessment can be completed and a plan developed to either reduce the potential for joint employer liability or to embrace it by making sure that labor relations at the franchise level are handled in compliance with applicable labor laws.

The NLRB press release can be found here.

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