Yesterday, the National Labor Relations Board ("NLRB")
issued a landmark ruling that greatly expands the definition of
corporate employee under the "joint employer" standard.
The NLRB's decision is significant for franchisors among others
because it will likely affect the arms-length relationship that
franchisors have sought to preserve with their franchisees'
employees.
Under the previous standard, a company such as a franchisor could
be a joint employer if it had direct and immediate control over
working conditions. Under the standard announced yesterday, a
company such as a franchisor can be a joint employer if it has
indirect control over working conditions or reserves the right to
exercise that authority.
The NLRB opinion does not specify exactly how much indirect control
is required to constitute a joint employer relationship. The board
suggested the facts and circumstances of each case must be examined
individually.
Concerns have been raised that this decision may affect the
franchise model, which traditionally relies on franchisees'
ability to supervise their own employees. Among other potential
consequences, the prospect of joint employer status will presumably
lead to efforts in future lawsuits to hold franchisors (with their
generally deeper pockets) liable for the acts and omissions of
their franchisees' employees.
The NLRB decision is appealable so there will likely be more to
this story in the coming weeks and months.
To read the full case opinion, please click here.
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