A union-backed effort to bolster flagging dues and membership at the expense of franchise businesses across the United States received a huge boost from the Obama administration recently. The highly partisan National Labor Relations Board’s (NLRB) Division of Advice ruled that McDonald’s Corp. could be designated as a “joint employer” with its franchisees. This recommendation is wrong and unjustified. It would upend years of precedent and threaten the sanctity of contracts, a bedrock principle of the rule of law. Millions of jobs and the livelihoods of independent business owners dependent on the success of the franchise model are at risk.
The move was clearly intended to benefit labor unions such as the Service Employees International Union (SEIU). A new “joint employer” standard would make it easier for unions like the SEIU to organize multiple franchisees since they would be considered part of a single entity. This could result in disruptions of service at multiple locations, harming workers and consumers. At the same time, the unions argue that corporations already assume operational control over employment and human resources decisions. In fact, corporate headquarters have no control over day-to-day operations of their franchisees. Taking them over would be a huge and expensive task.
Thirty years of legal rulings and practice dictate the relationship between franchisors and franchisees, which is cemented by legal contracts. Those contracts state clearly that employee management decisions are at the discretion of the franchisee, not the franchisor.
Under this arrangement, franchisees and their employees do not work for franchisors. Across the United States, franchisees have built nearly 770,000 businesses and employ roughly 8 million people. Franchisees establish day-to-day employment practices and policies for their own businesses. They decide who to hire and fire, wage rates, benefits and work schedules. If the “joint employer” recommendation is adopted, these thousands of small business owners would lose control of the operations they built and lose equity that they worked so hard to create.
The NLRB recommendation is a drastic and far-reaching solution in search of a problem. Ample federal, state and local remedies are available and are regularly used to enforce current law. These remedies include NLRB action, state attorneys general action and private rights of action. Given these many avenues of redress, why destroy the tenets of the franchise model that has been providing jobs to the economy for the last 50 years? It would do more harm than good to workers, consumers and small business owners. The NLRB would be wise to ignore this flawed opinion because it would make hiring workers more difficult in an already challenging environment.
