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What Franchisees Need to Know About the Brown-Ferris Decision

Posted on Date: Oct 12, 2015


At the end of August, the National Labor Relations Board delivered a decision on the Browning-Ferris Industries case. Although franchisors and franchisees were not directly involved in the case, the implications of the decision have franchisors and franchisees very worried.

The case itself revolves around Browning-Ferris Industries, a recycling plant that contracted employees from a company called Leadpoint. The two companies engaged in a very standard labor supply contract. Browning-Ferris maintained that Leadpoint was the employer of the contracted employees and that it had no responsibility to negotiate with them for things like improved wages, better scheduling, etc.

The NLRB disagreed. In a 3-2 decision, the majority redefined its standard for determining joint-employer status. Here is a snippet of the decision from the NLRB website:

“…the Board applies long-established principles to find that two or more entities are joint employers of a single workforce if (1) they are both employers within the meaning of the common law: and (2) they share or codetermine those matters governing the essential terms and conditions of employment.”

What does this actually mean? It dramatically lowers the threshold for when a company can be considered a joint employer, and thus responsible for negotiating with employee unions. A company doesn’t even have to regularly exercise control over an employee’s work conditions in order to meet the new standard; it merely has to have the right to do so.

Catherine Fisk, the Chancellor’s Professor of Law at the University of California, Irvine explains it well for, “The majority’s basic position is that a company cannot have it both ways. If they want to control the process and products of work in order to ensure good quality service or an efficient process, as Browning-Ferris did, then they cannot divest themselves of the legal responsibilities of being an employer.”

Franchisors are extremely nervous about this decision, because for the past 50 years, they’ve been actively increasing their control over their franchisees and, by extension, the working conditions of a franchisee’s employees. Franchisors mandate employee uniforms, suppliers, and product pricing, which affects how much a franchisee can afford to pay workers.

Many franchisors and franchisees are afraid that the Browning-Ferris decision opens the doors to unionization. A huge franchisor like McDonalds may no longer be able to claim that employees must negotiate directly with their franchisee who has a limited ability to change working conditions. Franchisees may now be to unionize and demand improved working conditions and higher wages directly from a franchisor.

In fact, the two dissenting decisions on the Browning-Ferris case brought up this exact concern. At this point, we don’t know exactly how the Browning-Ferris decision will impact the franchise industry. Several cases are pending with the board that may clarify whether franchisors like McDonalds can be punished as a joint employer for illegal workplace activities that took place at their franchised locations.

At the AAFD, we believe the Browning-Ferris decision was inevitable, given how much power franchisors have wielded over their franchisees. We think this decision could actually be an exceptional opportunity for franchisees to renegotiate for more power in their franchise agreements. Read our full reaction to the decision coming soon.

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