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Why the NLRB Says This Franchise Isn't a Joint Employer, But McDonald's Is The franchise industry just got a clue to untangling a knotty problem.

By Kate Taylor

Opinions expressed by Entrepreneur contributors are their own.

As the battle over the definition of "joint employer" continues between the National Labor Relations Board (NLRB) and McDonald's, the franchise industry just got an example of how to avoid joint employer status.

The NLRB released a memo, dated April 28, detailing the board's conclusion that healthy fast-casual chain Freshii is not a joint employer. The board said it found that the chain did not have a significant role in employee issues, such as hiring, firing or discipline (the case was prompted when two employees were allegedly fired for attempting or unionize).

"At most, Freshii's control over Nutritionality's operations are limited to ensuring a standardized product and customer experience, factors that clearly do not evince sharing or codetermining matters governing essential terms and conditions of employment," the board wrote.

The NLRB caused an outcry in the franchise industry last July when it deemed McDonald's a joint employer and therefore a responsible party in labor cases, making this memo a study in contrasts. The board is currently conducting hearings on the McDonald's joint employer case, with a final decision not expected to be released until 2016.

Related: Lawmakers Question Legality of NLRB's Joint Employer Decision

The memo offers some key insight into the future of the conception of joint employer, spelling out how the general counsel's proposed standard differs from the current understandings of the term. The general counsel has emphasized the need to find joint employer status "under the totality of the circumstances." That means considering both direct and indirect power of the franchisor, something the general counsel argues is in line with the traditional, if not current, standard.

If a franchisor's involvement prevents employees from meaningful bargaining with their employer, such as using corporate check ins to determine employee policies, the general counsel believes the franchisor should be held responsible as a joint employer. In Freshii's case, the franchisor does not fit this conception of joint employer. In McDonald's case, the board argues that it does.

Freshii, a company that recently made the news for challenging McDonald's to open a healthy location inside of one of the fast-food giant's restaurants, said that the decision served as proof that a franchise business can be entrepreneurial in nature.

"Yesterday's ruling favors the continued entrepreneurial spirit that fuels Freshii's growth and recognizes the value and distinction between a franchise brand and ownership of a particular location," Freshii CEO and founder Matthew Corrin said in a statement.

Related: In Tennessee, Only Franchisees Can Be Held Accountable for Employees

Kate Taylor

Reporter

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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