Franchising Update: NLRB and the Joint Employer Threat

Transcription

1 Franchising Update: NLRB and the Joint Employer Threat Presented by Mark S. VanderBroek Daniel M. Shea January 12, 2016

2 Intro Re: Joint Employer Issue Franchising model: franchisor licenses trademark and operating methods (system) to franchisees. Franchise agreement/manuals: franchisor controls goods/services sold by franchisee. Trademark law: requires licensor control. But too much franchisor control over franchisee risks: Franchisor as joint employer of franchisee employees Franchisor liability for franchisee actions 2

3 Overview of Joint Employer Issues 1. Employment Risks A. National Labor Relations Board (NLRB ) Activity Attack on McDonald's Browning-Ferris Decision Freshii Advice Memorandum B. Potential Issues Under Other Employment Statutes Title VII, Civil Rights Act Fair Labor Standards/Family and Medical Leave Act 2. Franchisor Vicarious Liability Risks 3. Minimizing Joint Employer Risks 3

4 Employment Risks NLRB NLRB Background re: Joint Employer Standard Supreme Court has indicated the common law test should be used under the NLRA, ERISA and a number of the discrimination laws. NLRB v. United Ins. Co. of America, 390 U.S. 254, 256 (1968). Common law test is fact specific and considers many factors. Particular focus on putative employer's control of manner and means of performing the work, but no one factor is determinative. Courts have also identified "entrepreneurial opportunities" as the touchstone of the common law test whether the putative independent contractors have a "significant entrepreneurial opportunity for gain or loss." FedEx Home Delivery v. NLRB, 563 F.3d 492 (DC Cir. 2009). NLRB recently attempting to expand joint employer standard. 4

5 Employment Risks - NLRB McDonald's Complaints (2014) NLRB issues complaints against McDonald's and franchisees for unfair labor practices (retaliation for union organizing activities). Charge that McDonald's a "joint employer" so jointly liable. Important factors (per NLRB General Counsel): McDonald's own and leases real estate (control and policing of on-site union activities). McDonald's Involvement in franchisee employee scheduling. - Real time scheduling management software. - Franchise consultants ensure compliance. 5

6 Employment Risks - NLRB NLRB Browning-Ferris decision (August 2015) Overruled 30 years of precedent, and established broad standard for who can be deemed joint employer of an employee. Old Standard: Whether party had direct and immediate control over the employee. Laerco Transportation, 269 N.L.R.B. 324 (1984) New Standard: Control need not be immediate and direct over employee, where party preserved authority to control. 6

7 Employment Risks NLRB BFI had 60 employees at recycling facility and contracted with temporary labor supplier for 150 additional employees. BFI involved in hiring, wages, discipline and other employee controls. The Union (IBT) wanted to represent all 210 employees. NLRB reversed ALJ and found joint employer relationship holding that collective bargaining would be hindered without BFI. BFI decision is far from over and is part of continuing policy of current administration to help unions organize workers to reverse decline of organized labor by giving employee status to temporary workers, independent contractors and supervisors. Not a franchise case; BFI unlike typical franchise setting. 7

8 Employment Risks NLRB Freshii Advice Memorandum (NLRB General Counsel Office, April 2015) Facts re Freshii Franchise System: Standard Franchise Agreement Operations Manual includes suggestions but not requirements for employee hiring, scheduling and management Required POS system but no labor scheduling component Development Agents handled training and inspections No evidence Freshii guiding franchisee on possible union organizing campaign 8

9 Employment Risks (con't) Freshii Advice Memorandum (NLRB General Counsel Office, April 2015) NLRB: Freshii not a joint employer Under NLRB then-current standard because no evidence Freshii shares or codetermines matters governing essential terms/conditions of employment of franchisee employees Under NLRB new (Browning-Ferris) standard because Freshii not significantly impacting working conditions of franchisee employees 9

10 Employment Risks Other Statutes Title VII of the Civil Rights Act of 1964 In 1997 guidance to staffing agencies, Equal Employment Opportunity Commission (EEOC) pointed out that two entities qualify as joint employers of the worker "where both have the right to exercise control over the workers employment." 2 EEOC Compl. Man. 605 (BNA). Third Circuit in Faush v. Tuesday Morning, Inc., (2015) found retail client of staffing agency could be considered temporary worker's employer where retailer supervised worker's day-to-day performance, provided training, and kept track of worker's hours (claim for alleged discrimination by retailer). In Betts, et al v. McDonald's Corporation (Va.), employees of franchisee sued for race discrimination and harassment. McDonald's named a co-defendant citing the workforce software, operating manuals, employee surveys, corporate assessment of applicants prior to hiring, and other factors including the Franchise Agreement. 10

11 Employment Risks Other Issues Fair Labor Standards Act/Family and Medical Leave Act FLSA/FMLA case law has not crystallized around a fixed set of common law test factors, but more on "totality of circumstances" including "economic realities" rather than a checklist. Six frequently-cited factors for joint employer - including degree of control exercised by alleged employer over employee. DOL regulations: When parties are "joint employers" each will be liable "individually and jointly, for compliance with all of the applicable provisions of the FLSA with respect to the entire employment for the particular work week." 29 CFR 791.2(a). Where two or more businesses exercise some control over work conditions of the employee, the business may be joint employer under FMLA." 29 CFR (a). 11

12 Franchisor Vicarious Liability Risks Franchisor Vicarious Liability for Acts of Franchisee or Franchisee Employees Courts analyze under one of two tests: Means and Manner Test. Whether franchisor controls the means and manner of operation of franchisee's business. Domino's Pizza, Inc. v. Parker (Fla.) plaintiffs injured by Domino's franchisee delivery driver. Court ruled franchise agreement and operating manual evidenced sufficient control by franchisor to raise question of fact regarding liability. Pizza K v. Santagata (Ga.) similar facts, franchisor not liable because didn't control time and manner of franchisee work or supervision of delivery drivers. 12

13 Franchisor Vicarious Liability Risks Instrumentality Test. Whether franchisor controlled the instrumentality that caused harm to the plaintiff. Hong Wu v. Dunkin Donuts, Inc. (N.Y.) franchisor not liable for assault on franchisee employee. Did not control instrumentality that caused harm, because it did not mandate specific security measures. Keri v. Rasmussen (Wis.) franchisor not liable for franchisee employee who left work and shot exgirlfriend. Franchisee had sole control over hiring and supervision of employees. 13

14 Minimizing Franchise Joint Employer Risks General Conclusions re: Joint Employer Issues Joint employer standard is changing It's all about "degree of control" Very fact dependent Suggestions to Minimize Risks Review/revise franchise agreements Audit /revise operations manuals Review training programs and field practices No mandated employee scheduling software Other 14

15 Franchising Update: NLRB and the Joint Employer Threat Thank you! For copy of PowerPoint or Freshii NLRB Memorandum: