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Franchise Industry Strikes Back at NLRB's 'Joint Employer' Decision The NLRB's recent ruling has the potential to tear the franchise model apart at the seams. So, franchisors and franchisees are taking action.

By Kate Taylor

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

As summer turns to fall, news-conscious franchisees all have one thing on their minds: the National Labor Relations Board's decision to consider McDonald's a joint employer of all workers and how it will affect the franchise business model.

"This joint employee-employer thing, if that goes through, that's a hand grenade in the middle of the [franchising] business model," says Two Men and a Truck and BrightStar Care franchisee Bill Bass. "It would completely change everything about the franchising model, to the point where we probably wouldn't be in franchising."

Last week, Bass and around 360 other members of the franchise industry flew to Washington, D.C., to make sure the model stays intact. They were brought together by the International Franchise Association's Public Affairs conference, an annual advocacy event on Capitol Hill. Attendees included 135 franchisees, 115 franchisors and 110 supplier partners from a range of sectors including restaurants, hotels and lawn care.

Related: Why Chipotle Won't Franchise

In July, the NLRB decided to name McDonald's as a joint employer in 43 board-authorized cases involving the franchisor. It is still unclear what effect the decision will have on other franchises, but the IFA and others in the franchise industry are prepared for the worst. The biggest concern is that, with the NLRB's decision, franchisors will be forced to take control over employment issues that have traditionally been the concern of franchisees, esentially turning franchisees into company employees.

"Fundamentally, what the issue is here is who employs the employees. And I employ our employees. I'm the business owner," says Bass. "We give our employees 401(k)s and health care, that's a decision that we make."

While franchisees are concerned about surrendering their freedom, franchisors also have reason to fear the policy change. Accepting that they are joint employers could force franchisors to take responsibility for everything from employee wages to worker harassment cases.

As a whole, Republicans have been more open to the IFA's criticism of the NLRB's decision. Republican Senators Mitch McConnell and Lamar Alexander introduced a bill last week that would restructure the NLRB to have an equal number of Democrats and Republicans (currently, there are three Democrats and two Republicans). Meanwhile, Democrats have been more supportive of the board's rulings and the need to hold franchisors accountable for some employment-related issues.

Related: In Sexual Harassment Case, California Rules Domino's Isn't Responsible for Misconduct

"Our advocacy and grassroots efforts have been focused on educating Members of Congress how changes to the joint employer standard decision by the NLRB's General Counsel is already having a negative impact on the franchise business model," says IFA President Steve Caldeira.

Fly in attendees asked Congressional members to sign a letter asking for NLRB to release the internal advice memo that explains the board's decision to consider McDonald's a joint employer, says Bass.

"We aren't asking anyone to change what they're doing or what they think, but release the memo and see the reasoning of the decision," says Bass. He says that he hopes that the signed letter could be the push the NLRB needs to explain the decision that has made him and other franchisees nervous about the future of their industry.

"This would be a huge impact on the economy," he says. "It makes my stomach hurt to imagine that a 3-2 vote at the National Labor Relations Board… could have that big of an impact."

Related: Why the Court's Ruling on FedEx Drivers Could Jeopardize the Franchise Model

Kate Taylor


Kate Taylor is a reporter at Business Insider. She was previously a reporter at Entrepreneur. Get in touch with tips and feedback on Twitter at @Kate_H_Taylor. 

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