Back in 2015, the National Labor Relations Board (NLRB) under the Obama administration redefined what it means to be a “joint employer.” The change, pushed by labor unions, made large corporations that sell franchise rights to independent operators responsible for the HR decisions of those private outlets. The result was uncertainty in several industries, particularly the fast food sector. As I wrote at the time, this was an obvious backdoor for collective bargaining agreements and the biggest targets of the Democrats on this front were in the fast food industry. (McDonald’s actually only owns about 30% of the restaurants you see. The rest are franchised.)
Last December, a part of that rule was overturned, declaring that the “joint employer” standard would only be applied if one entity “exercised direct and immediate control” over essential employment terms of the other. This was a good move which was applauded by employers and relieved some of the burdens on the larger companies which provide a substantial number of jobs around the country. But at the same time, it still failed to completely reel in the redefinition imposed under the Obama administration.
Now, the process may come full circle. As the Daily Caller reported this week, the NRLB is now fully staffed up and appears ready to return to business as usual in this regard.
“The NLRB’s proposed rule seeks to restore longstanding principles on what establishes a joint employer relationship, which rightly center around direct and substantive control over work conditions of another business,” Competitive Enterprise Institute labor policy analyst Trey Kovacs said in a statement.
“The proposed new standard will create greater certainty for businesses, which will allow employers to plan for the future and be confident in knowing what kinds of business-to-business arrangements will establish a joint employer relationship,” he continued.
Since the definition of a joint-employer was expanded, corporate franchisors have been rolling back support for franchisees who have purchased the rights to open a business under the brand name, Great Clips franchise owner Jerry Akers told The Daily Caller News Foundation.
As mentioned above, the resistance to these changes is being driven entirely by the unions. Under current rules, there are still situations where the unions can muscle their way into forced collective bargaining with both the franchisor and the independent franchisees. But the franchisor typically only provides guidelines and best practice advice to the franchisees when it comes to many HR decisions. That’s an important bit of flexibility because conditions vary in different labor markets around the country. Additionally, franchisees frequently have to deal with a dizzying array of state and local regulations which make a one size fits all policy impractical, if not crippling.
Underneath all of this is the common sense understanding that negotiations over labor agreements need to be made with the people who control those HR decisions. In cases where a franchisor directly controls the hiring decisions and compensation packages offered at the franchisee’s outlet (which is rare), unions can still bargain with the controlling franchisor. But independent operators doing business under the franchisor’s name can’t reasonably be expected to submit to such bargaining restrictions.