On December 14, 2017, the National Labor Relations Board overturned the Obama era rule that held larger employers and companies responsible for labor law violations by their franchisees and subcontractors. The rule was known as the “joint employer rule” and it allowed employees to sue companies that offer franchises for violations of the franchisees even though the parent corporation had only indirect or minimal control over the employees.
The rule also would allow employees of a franchisee to negotiate with the parent corporation instead of the franchisee. The same would apply to subcontractors. This rule resulted in an unfair burden to large corporations and small businesses alike by clouding the employer/employee relationship.
Earlier this year, the NLRB revoked guidance that made franchise companies and franchisees liable for violations of wage and hour laws. This latest change puts an end to the last vestiges of the joint employer rules that were so cumbersome to employers.
The NLRB’s decision means that companies will only be held to be joint employers if they have direct control over workers. Realistically, this is the only fair way to address labor and employment issues.
Under the Obama era rules, a company like McDonalds could be held liable if one of its franchisees failed to pay the minimum wage. It could also be forced to negotiate a collective bargaining agreement with workers even if it did not directly employ them or have any control over their day to day activities. Large employers and franchise companies can hardly be expected to keep track of or be held responsible for the actions of the companies with which they subcontract work to or offer franchises to. Such expectations are hardly reasonable.
This NLRB decision suggests an employer friendly shift at the Board. This is definitely a good sign for employers moving forward into 2018. If you have any questions regarding the change to the joint employer rules or any other labor related issues, do not hesitate to contact Ancel Glink.