The battle continues to heat up between the National Labor Relations Board (NLRB) and the judicial system in the State of California, which recently ruled that the franchisor Massage Envy is not the employer of massage therapists in its independently-owned franchises. As a result of the ruling, only the franchisees could be held responsible for alleged wage violations in their establishments.
The ruling would appear to go against recent moves by the NLRB general counsel to broaden the definition of joint employer to include brand companies and their local franchise owners, specifically in the case of the McDonald’s Corporation. In a controversial ruling in July 2014, the NLRB deemed McDonald’s a joint employer in complaints lodged against franchisees. In December, the NLRB reinforced its decision by issuing complaints against McDonald’s corporate and McDonald’s franchisees as joint employers in 86 alleged labor violations.
Domino’s Pizza not Liable
The judicial system, however, continues to uphold a long standing opinion that franchisors cannot be held responsible for misconduct at franchised locations unless it can be proved that the franchisors were somehow involved in the employment practices. The California Supreme Court, in late August of 2014, declined to hold Domino’s Pizza, LLC jointly liable in a sexual harassment case brought against one of its franchisees.
The decision in the Domino’s case left a small amount of hedge room, stating, “[We do not] mean to imply that franchisors, including those of immense size, can never be held accountable for sexual harassment at a franchised location.”
IFA Speaks Out
The International Franchise Association (IFA) has come out squarely on the side of the judicial system, against the NLRB rulings, saying “Should brand companies and local franchise owners be considered joint employers, it will substantially impact growth and job creation in what promises to be the fastest growing business sector in the US economy.”
Despite IFA and franchise industry requests for the NLRB to provide further explanation of its joint employer decisions in the McDonald’s rulings, the Board has declined to do so. Therefore it’s difficult to ascertain whether more franchises could be affected by the decision, or whether it remains specific to the McDonald’s Corporation.
Although the battleground, so far, appears to be in California, we could soon see cases cropping up all over the nation, and no one is certain how those courts will respond. One thing is clear, however: the future of the franchise industry could rest squarely on the outcome of this deepening legal divide.