Page 138 - Entrepreneur - USA (January - February 2020)

THE FRANCHISE

WHAT’S T (DOL) and the National Labor Relations Board
he franchise world was on alert. In a series of actions
between 2014 and 2016, the Department of Labor

(NLRB) issued guidelines suggesting that every employee
within a franchise system could have two bosses: the
franchisee and the franchisor. This was joint employer—the
idea that a local franchisee and a parent company were jointly
UP WITH employing their workers.
To franchisors, this news held potentially devastating legal
repercussions. They’d long operated under the assumption
that each franchisee was solely responsible for its employees.
If Jane Frycook was unhappy with her work conditions, she
could sue the SuperBurger franchisee that hired her. What she
couldn’t do was sue the corporate office. But these new inter-
JOINT pretations appeared to change all that.
Well, not so fast. The Trump administration declined to
enforce the guidelines—in fact, it recently walked them back.
Confused? So is everybody else—and this past year, the state
and federal governments added a few new regulations.
“In these times, franchisors must keep up on the legal land-
scape,” says Steven Suflas, a labor and employment attorney
EMPLOYER? at the law firm Ballard Spahr. “Future administrations could
change the rules yet again.”
We can’t predict the future, but here’s how we arrived at
where we are today.

—
Regulators propose new rulemaking.
APRIL 2019
The DOL proposed new rules on joint employment. (The NLRB did the
same in 2018.) Both efforts aimed to clear up ambiguity by drawing a
hard line: Franchisors will not be considered joint employers, the rules
say, unless they control local franchisee operations like hiring, firing,
and employee scheduling. The new rules will likely be published before
Since 2014, a regulation known as “joint employer” the next election, but even if that happens, experts say they may not be
has loomed over the franchise world, threatening permanent. “Depending on what happens in the next couple of years,”
says Steven Porzio, senior counsel with law firm Proskauer, “there may
to upend the model as we know it. This past be a push by what could be a Democratically led [NLRB] board to unwind
year brought some news. Here’s the latest. and reverse this rulemaking attempt.”

States join the battle.
JUNE 2019 —
by JASON DALEY Attorneys general from 18 states submitted comments to support
stricter joint-employment standards. At the same time, Washington
State also went after “no-poaching” clauses that some franchisees
have employees agree to. (The clauses prevent employees from moving
locations within the same chain unless they get permission from their
employer.) Seven fast-food chains agreed to stop using them.

Franchises fire back.
AUGUST 2019 —
The International Franchise Association launched a campaign in support
of a law called the Trademark Licensing Protection Act. It was first intro-
duced in 2018 but has yet to make its way out of committee. The law
would allow franchisors to enforce workplace standards that protect
their brand, without being considered joint employers.

DECEMBER 2019 —
McDonald’s gets a big win.
In a victory for franchising, the NLRB resolved a four-year trial in favor
of McDonald’s, claiming that the company’s corporate office was not a
joint employer. “This settlement is significant,” says Suflas. But it’s also
unlikely to be the last word, since the proposed DOJ and NLRB rules have
yet to be published. “It’s likely those new rules will be challenged and the
uncertainty will continue,” he says.

136 / ENTREPRENEUR.COM / January-February 2020 Illustration / NICOL ÁS ORTEGA