One of the things that has hurt our economy and wages has been the idea of Franchises and Sub-Contract work. Some people think they are great for our economy. But, these two business models were invented to keep the “parent” company from having to follow any labor laws.
For example, companies like McDonalds, Burger King, etc., have used the franchise model for years. They say they have no responsibility for any complaints about wages or violations of labor laws because their stores are “franchises” owned by private people.
Yet, they charge an un-godly amount of money so the franchise can use the name. Additionally, they dictate the uniforms, where franchisee’s can purchase their product, and a whole host of other rules.
They maintain that these rules are necessary to “maintain” the quality their brand is known to provide. Without these rules, franchisee’s could change the uniform and/or purchase from other vendors which would affect the quality of the product.
Yet, even though they dictate all of these rules, they claim they do not own the store, and are not “joint-employers” of the franchise. This has resulted in parent companies to effectively elude responsibility for labor problems.
That may all change. There was a little-known case before the National Labor Relations Board that challenged these models. In the case, the Teamsters Union was in a battle with Browning Ferris Industries over unionizing drivers including sub-contractors. Browning Ferris Industries is a waste management company that uses sub-contractors.
On Thursday, the National Labor Relations Board ruled that Browning Ferris Industries qualifies as a “joint employer” alongside one of its subcontractors. The decision effectively loosens the standards for who can be considered a worker’s boss under labor law, and its impact will be felt in any industry that relies on franchising or outsourcing work.
This ruling has huge impacts for both the sub-contracting and the franchising industries. This ruling means that the huge companies can no longer hide from their responsibilities for workers who basically work for them.
The ruling was made along party lines. The three democrats on the board ruled in favor and the two republicans ruled against it. The majority members wrote that parent companies shouldn’t be absolved of their obligations to workers at the bottom of the contracting chain.
It is not the goal of joint-employer law to guarantee the freedom of employers to insulate themselves from their legal responsibility to workers, while maintaining control of the workplace. Such an approach has no basis in the [National Labor Relations] Act or in federal labor policy.
Labor Unions and advocacy groups have been hoping for a decision like this one. They claim that if a company maintains such control over how a franchise is run, they should be legally liable for the workers even if they technically work for a franchise.
Of course everyone doesn’t agree with the ruling. The negative reactions from the business community were swift. The National Restaurant Association, a leading lobby for the industry, issued a statement Thursday saying the ruling “is overturning years of established law that has worked to help grow business and feed our economy.” The Competitive Enterprise Institute, a libertarian think tank, said the ruling would have a “devastating economic impact.”
The ruling cold have major impacts on the brand companies who use these models. It will make it easier for them to be considered as “joint employers” whenever there is a conflict of labor laws. Something they have been able to avoid for years.
Of course the Franchise Association claims that the franchisees will be the ones hurt the most. I don’t quite see that claim since they won’t have to face these problems alone anymore. But time will tell on that point.
In any case, companies like McDonald’s have been dreading this ruling for a long time. The board’s general counsel, who functions as a kind of prosecutor, has already named McDonald’s as a joint employer alongside some of its franchisees in several cases involving alleged unfair labor practices. Many observers took that move as a sign that the board would soon revise its standards for what makes a company a joint employer.
The thing that we can be sure this ruling will bring, is more attacks against the National Labor Relations Board from business groups and Republicans. Republicans have already called for closing down the National Labor Relations Board. This ruling will simply make those calls even louder.
It is way too early to tell what impact this ruling will ultimately have. But, I think it was the right decision. Huge companies have been able to hide behind these business models for too long. If a company actually dictates how a franchise is to operate, they should be classified as a joint employer and share responsibility for how their employees are treated.