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National Restaurant Association - How a new 'joint-employer' standard could hurt franchising

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How a new 'joint-employer' standard could hurt franchising

Recent moves by the National Labor Relations Board are threatening franchise independence, and that has franchise owners like Tom Saia worried.

Saia, a Burger King Franchisee and 37-year veteran of the restaurant business, thinks the NLRB’s efforts to redefine its decades-old “joint employer” standard could damage the growth potential for franchises and the ability of current owners to create opportunities.

“Joint-employer,” explained: The “joint employer” standard is how the NLRB determines whether an individual is employed by two independent companies when it investigates complaints about unfair labor practices. Historically, the standard has recognized franchise independence. However, the NLRB abruptly changed course last year and announced it would consider a prominent restaurant franchisor as a joint employer in a handful of unfair labor practice cases against franchisees. This shift in direction means franchisors could be held responsible for decisions that were solely made by franchisees. The increased liability could lead franchisors to take a hands-on approach in matters like hiring, firing and promoting, that are normally handled by franchisees. 

“I’ve worked hard to become a franchise owner,” said Saia, who got his start in restaurants as a busboy and dishwasher. “I feel like I’d be working for a large company, and not be my own boss anymore. My life savings is in my business. I don’t want someone else on a larger scale telling me what to do.”

Equally concerning to Saia is how a widespread change in the joint-employer standard would be felt by the employees at his eight Maryland restaurants. “There’s no doubt in my mind that the opportunities for employees are going to be affected,” he said. “We promote almost 80 percent of our people from within. Those are decisions we make as individual franchise owners.”

Owners of restaurants and other franchises around the country are making the case for franchise independence directly to members of Congress. The Coalition to Save Local Businesses, which includes the National Restaurant Association, has been holding a series of meetings in an effort to secure legislation to stop the joint-employer change. Saia was among a group of franchise owners who met recently with Rep. Steny Hoyer (D-Md.).

“I thought [Hoyer] did a great job of listening to the concerns of all the business people,” Saia said. “I felt comfortable that he understood what this could conceivably do to the franchise landscape as we know it.”

There are signs that Congress is looking to address the issue. A subcommittee of the House Committee on Education and the Workforce subcommittee will hold field hearings in Savannah, Ga., and Mobile, Ala., next week on the joint employer issue. A Firehouse Subs franchisee is set to testify.

What’s next:  The NLRB is expected to issue a ruling soon in a case brought by the International Brotherhood of Teamsters against Browning-Ferris Industries that will determine whether a staffing agency can be considered a joint employer. The NRA filed an amicus brief  in that case urging the NLRB to preserve the settled joint-employer standard that properly treats third parties as independent business owners.

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