NLRB Decision Could Create Significant Issues For Franchisors



By R. Joseph Leibovich
(901) 328-8269

The National Labor Relations Board (“NLRB”) has issued a ruling that could have a profound impact on franchisors throughout the nation.  The NLRB in a case involving Browning-Ferris Industries of California (“BFI”) issued a 3-2 decision along party lines that expands the concept of who is a “joint employee”.  The decision stated:

The Board may find that two or more entities are joint employers of a single work force if they are both employers within the meaning of the common law, and if they share or codetermine those matters governing the essential terms and conditions of employment. In evaluating the allocation and exercise of control in the workplace, we will consider the various ways in which joint employers may “share” control over terms and conditions of employment or “codetermine” them, as the Board and the courts have done in the past.

In applying this test, the Board found that BFI was a joint employer with a company that it contract with to provide workers at a sorting facility.

Many believe this decision will also be applied to franchisors/franchisees.  This is significant in the area of potential unionization efforts.  For example, say Tasty World, Inc. (a fictional company) is a national fast food franchisor with franchisees across the country.  One is operated in Peoria, Illinois by John Doe Enterprises, Inc.  In this hypothetical, a union campaign to organize the workers at the Peoria location based on the issue of pay in excess of the minimum wage.  The union succeeds.  Now, John Doe Enterprises, Inc. must collectively bargain with the union.  But in addition to that, under the BFI decision, Tasty World, Inc. would also be drawn into the collective bargaining process.  This is a situation that many franchisors are not happy with.

In addition to the collective bargaining issue, the BFI decision could lead to franchisors being liable for potential unfair labor practices committed by the franchisee, even if the national franchisor has no actual knowledge of these alleged violations. Using the same hypothetical, if John Doe Enterprises, Inc. improperly threatened potential bargaining unit employees during the unionization effort, Tasty World may face liability even if it wasn’t aware of the threats or, for that matter, of the union campaign at all.

Business groups are vocally critical of this decision and its potential impact on franchisors.  Furthermore, this decision could potentially lead franchisors to reconsider the entire franchisor/franchisee model.  It will be interesting to see how courts apply the joint employer definition in labor relations issues, and to see if or how franchisors adjust their business based on the potential impact of the decision.

Some states, including Tennessee, have enacted statutes that specifically state that employees of a franchisee are not employees of a franchisor.  For example, a recently enacted Tennessee law states “Notwithstanding any voluntary agreement entered into between the United States department of labor and a franchisee, neither a franchisee nor a franchisee’s employee shall be deemed to be an employee of the franchisor for any purpose.” (Tenn. Code Ann. 50-1-208).

For issues that come under the NLRB’s purview, however, these state laws will likely not provide insulation from the Board’s decision.

NLRB Imposes Posting Requirement On Most Employers

By Joe Leibovich
(901) 328-8269

Beginning January 31, 2012, most private employers will be required to post information on employee rights under the National Labor Relations Act (“NLRA”).  This information is to be posted along other mandated postings, such as those describing minimum wages and rights under Title VII.  The requirement is a result of regulations promulgated by the National Labor Relations Board (“NLRB”)

Most private employers  (except very small ones) and most private employees are covered under the NLRA, with some exceptions, such as most governmental employees, agricultural workers, individuals employed by a spouse or parent, and, in most cases, supervisors.  The posting requirement applies to unionized and non-unionized workplaces.

The posting, among other things, informs employees of their rights to form a union, to collectively bargain, to discuss wages and benefits and other conditions of employment with co-workers or a union, or to choose not to join a union or take other collective actions, and gives employees contact information for the NLRB.

The posting also must set out various acts that are illegal by both employers and unions.  For example, the posting must state it is illegal for an employer to prohibit employees from talking about or soliciting for a union during non-break time, or from distributing union literature during non-work time in non-work areas such as parking lots and break rooms.  There are other specific requirements as to what the posting must contain.  Fortunately, the NLRB has a free, downloadable copy of the poster on its website,

Many employers have criticized the new posting requirement, arguing that the rule is too pro-union, and that it is unfair for an unelected government agency to be able to mandate what employers must do.  Nonetheless, the rule will be in effect, and employers who fail to put up the required notice could be charged with an unfair labor practice.

As always, if you have any questions about whether or not your business should post this new notice, you should contact an attorney.


UPDATE:  This report has been updated to note that the posting requirement has been postponed until January 31, 2012.