Does the person who flips your fast-food burgers work for the guy who owns the restaurant or the corporation that the restaurant is a franchise of?
The federal National Labor Relations Board recently said it can be both, upending more than 30 years of legal precedent. Franchisers and franchisees warned members of Congress on Tuesday the new standard could wreak havoc with the economy.
Business owners, both franchisers and franchisees, told the House Education and the Workforce Committee that the NLRB’s move could undermine the franchising model, one of the main ways people get into business for themselves, by taking control away from the local owners.
Jagruti Panwala, board member of the Asian American Hotel Owners Association, whose members own 40 percent of U.S. hotels, said the NLRB’s new standard would force the larger corporations to assert more control over individual franchises. She would literally lose control over the businesses she personally owns.
“In an effort to protect against liability, franchisors would likely have to take an active role in basic employee management determinations like hiring, firing, wages, hours, benefits and schedules,” Panwala said. “If this were to happen, I would essentially become an employee of the parent corporation and no longer an entrepreneur.”
Catherine Monson, chief executive officer of graphics company Fastsigns International, agreed and warned that this would in turn make the business model less attractive for both sides, hurting the broader economy.
“Franchisers will stop selling franchises and franchisees will stop buying,” Monson said. “Individual entrepreneurs would be deprived of the opportunity to own their own businesses, franchisers would be denied the ability to expand their businesses, and millions of jobs would be lost.”
NLRB General Counsel Richard Griffin announced in late July that his office would consider McDonald’s Corp. a joint employer with its individual franchises in unfair labor practices cases it was investigating. Eighty percent of McDonald’s franchises are privately owned.
It was not an official decision by the full board, which could still reject the counsel’s action, but it nevertheless sent shockwaves through the business community. Many fear the full board, which has a Democratic-appointed majority, will adopt it as a standard.
Labor politics are a big factor in the case. The charges against McDonald’s involve alleged retaliation against employees for joining in protests organized by the Service Employees International Union, which has struggled to organize fast-food workers. Making the franchiser corporations employers would make organizing efforts easier by allowing labor groups to target one entity instead of thousands of individual businesses. Griffin is a former top lawyer with International Union of Operating Engineers.
Democrats defended Griffin’s announcement, saying the current franchising model does not give employees enough rights, especially regarding collective bargaining. “Once again, my colleagues have used this committee to try to undermine the NLRB,” said Rep. Ruben Hinojosa, D-Texas.
In any event, lawmakers are not likely to be able to influence the NLRB much, anyway, as it operates mostly independently. Its board members are nominated by the president and approved by the Senate, which last year approved a full slate of five members.
