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Franchising Industry Speaks Out About Joint Employer Decision

A decision from the National Labor Relations Board has been generating a lot of talk in the franchising world because it stands to significantly alter how franchise operations are managed. The case in question involved sanitation company and one of its subcontractors. The NLRB determined that both parties stood as “joint employers” of the workers.

Now that the news has had time to ripple throughout the franchising industry, key players and stakeholders are trying to figure out what it could mean for them. According to president of the International Franchise Association Steve Caldeira, the decision moving forward without court or congressional action could drastically “alter the face of American business”. His organization represents an industry with nearly 800,000 franchises and more than eight million workers. He believes that the current ruling could damage the American economy. While the organization cannot appeal the decision of the board directly, they have stated that they will do whatever is in their power to fight it.

It’s not just industry spokespersons who are concerned, either. Owners of franchises are wondering what kinds of obligations or risks such a standard brings to them. One owner of a bakery chain in California expressed concerns about being held to standards with a broader scope, which could ultimately increase administrative costs and the time devoted to these tasks.

 Franchise operations could be forced to comply with additional rules and costs that are in place for their parent company. Some franchise operators are concerned that these new rules would force them out of the business entirely because of the high costs associated with taking on these responsibilities. If forced to comply with these requirements, the landscape of franchising could change completely, and some businesses may be at risk of closing. That’s why Caldeira and others believe that the courts or Congress should intervene to stop the impacts of such big changes.

At minimum, the franchisors would have to develop and implement compliance networks. With the potential to alter business so much, it would require time and education to ensure that all parties are aware of their rights and responsibilities under this interpretation of the rule. The higher costs and time required to keep these structures in place could ultimately be passed on to consumers, a concern that is at the forefront for those committed to fighting the decision.

The spotlight is also on the NLRB already because of a dispute between labor unions and McDonalds. That conflict will be taken up this fall addressing similar concerns about joint employer status. If it is determined that McDonalds is viewed as a joint employer for their franchise stores, the company could be held responsible for workers’ rights violations, pay, and working conditions at their numerous locations around the United States.

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