O’Hagan LLC successfully represented the Chicagoland development agent of an international, fast-casual restaurant chain before the National Labor Relations Board (“NLRB”). The issue before the NLRB was whether the development agent was a “joint employer” of a local franchisee that allegedly terminated one employee and disciplined another for attempting to unionize the workforce. The NLRB Division of Advice concluded that neither the franchisor nor the development agent were joint employers in this case because they did not have any control or influence over the terms and conditions of employment for the franchisee’s employees.

The NLRB’s current joint employer standard allows a finding of joint employer status where two separate entities share or codetermine essential terms and conditions of employment for the workforce. Specifically, each must meaningfully influence matters such as hiring, firing, discipline, supervision, wages and scheduling. However, the General Counsel has proposed changing the standard to include any entity without whom meaningful bargaining cannot occur because of its influence over the working conditions of the other entity’s employees, or where “industrial realities” otherwise require a finding of joint employer status.

This “joint employer” issue has had considerable publicity recently. The NLRB is currently prosecuting a group of McDonald’s franchisees and McDonald’s USA, their corporate franchisor, under a joint employer liability theory for alleged unfair labor practices arising out of a series of one-day nationwide strikes by fast food restaurant employees. This precedent has been seen as a threat to the independence of franchisees by making it easier for labor unions to organize workers at large fast-food chains, and also potentially subjecting more franchisees to the Affordable Care Act’s mandate to provide health insurance to their employees.

The NLRB’s advice memo in the case O’Hagan LLC defended should come as reassurance to franchisors. Notably, the franchise relationship there was deemed “hands-off” enough to avoid a joint employer finding. If you’re concerned about being held responsible for the conduct of your franchisees, contact O’Hagan LLC for valuable advice on how to avoid such liability including a review of your franchise agreements and defending any NLRB actions.