Obama-era labor relations board decision that threatened franchises like McDonald's overruled

In a major victory for the franchise industry, the National Labor Relations Board (NLRB) repealed an Obama-era decision that would have made companies like McDonald's liable for the labor practices of their franchises. 

The Hill:

In a 3-2 decision, the Republican controlled board overruled the board's previous 2015 decision in a case, known as Browning-Ferris, which found a company to be considered a joint-employer with a subcontractor if it has "indirect" control over the terms and conditions of employment or has the "reserved authority to do so."   

In a statement, NLRB said in all future and pending cases two or more entities will be deemed joint employers under the National Labor Relations Act (NLRA) if there is proof that one entity has exercised direct and immediate control over essential employment terms of another entity's employees.  

Accordingly, under the pre-Browning Ferris standard restored today, proof of indirect control, contractually-reserved control that has never been exercised, or control that is limited and routine will not be sufficient to establish a joint-employer relationship. The Board majority concluded that the reinstated standard adheres to the common law and is supported by the NLRA's policy of promoting stability and predictability in bargaining relationships. 

The previous ruling was a boon to labor unions, who would have been able to go after large corporations like McDonald's and make them pay for the bad labor practices of some of their franchise-owners.

The issue of "joint control" has always been a bone of contention with unions, who claim that McDonald's and other companies have more say-so in how their franchises operate than they actually do.  Individual franchise-owners hire and fire their own workers, pay them, and manage their schedules.  If they violate the law by illegally withholding wages – a practice that unions claim is widespread in the industry – the onus is on the franchise-owners themselves.

This is how franchises have operated since they came into being.  But unions wanted the board to recognize  franchises as under the control of the parent company in order to gain leverage in an industry where they haven't had much luck organizing. 

The National Restaurant Association, which feared the 2015 ruling threatened the franchisee model, hailed the board for its decision.

"The 2015 Browning-Ferris ruling stacked the deck against small businesses and inserted uncertainty into day to day operations," Cicely Simpson, the group's executive vice president of public affairs, said in a statement.

"Today's decision restores years of established law and brings back clarity for restaurants and small businesses across the country."

No doubt, franchise-owners have dodged a bullet with the repeal of this decision.  It would have destroyed the franchise model and put hundreds of companies running franchises out of business. 

With Trump as president, it's clear that the NLRB is no longer a wholly owned subsidiary of the AFL-CIO.

In a major victory for the franchise industry, the National Labor Relations Board (NLRB) repealed an Obama-era decision that would have made companies like McDonald's liable for the labor practices of their franchises. 

The Hill:

In a 3-2 decision, the Republican controlled board overruled the board's previous 2015 decision in a case, known as Browning-Ferris, which found a company to be considered a joint-employer with a subcontractor if it has "indirect" control over the terms and conditions of employment or has the "reserved authority to do so."   

In a statement, NLRB said in all future and pending cases two or more entities will be deemed joint employers under the National Labor Relations Act (NLRA) if there is proof that one entity has exercised direct and immediate control over essential employment terms of another entity's employees.  

Accordingly, under the pre-Browning Ferris standard restored today, proof of indirect control, contractually-reserved control that has never been exercised, or control that is limited and routine will not be sufficient to establish a joint-employer relationship. The Board majority concluded that the reinstated standard adheres to the common law and is supported by the NLRA's policy of promoting stability and predictability in bargaining relationships. 

The previous ruling was a boon to labor unions, who would have been able to go after large corporations like McDonald's and make them pay for the bad labor practices of some of their franchise-owners.

The issue of "joint control" has always been a bone of contention with unions, who claim that McDonald's and other companies have more say-so in how their franchises operate than they actually do.  Individual franchise-owners hire and fire their own workers, pay them, and manage their schedules.  If they violate the law by illegally withholding wages – a practice that unions claim is widespread in the industry – the onus is on the franchise-owners themselves.

This is how franchises have operated since they came into being.  But unions wanted the board to recognize  franchises as under the control of the parent company in order to gain leverage in an industry where they haven't had much luck organizing. 

The National Restaurant Association, which feared the 2015 ruling threatened the franchisee model, hailed the board for its decision.

"The 2015 Browning-Ferris ruling stacked the deck against small businesses and inserted uncertainty into day to day operations," Cicely Simpson, the group's executive vice president of public affairs, said in a statement.

"Today's decision restores years of established law and brings back clarity for restaurants and small businesses across the country."

No doubt, franchise-owners have dodged a bullet with the repeal of this decision.  It would have destroyed the franchise model and put hundreds of companies running franchises out of business. 

With Trump as president, it's clear that the NLRB is no longer a wholly owned subsidiary of the AFL-CIO.