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NLRB General Counsel Memorandum on Joint Employer Status Alarms Franchisors – Glass & Goldberg | Financing, Property & Bankruptcy Law
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NLRB General Counsel Memorandum on Joint Employer Status Alarms Franchisors

National_Labor_Relations_Board_logo_-_colorA memorandum issued by the National Labor Relations Board (NLRB) Office of the General Counsel that a franchisor may be held jointly responsible along with a franchisee for unfair labor practices has the franchise industry alarmed as it awaits a final decision by the NLRB in a series of complaints filed by franchisee employees of McDonald’s USA, LLC.

The NLRB overturned the issue of joint employer status almost three decades ago, and the Board has not yet rendered an opinion in the matter of the McDonald’s franchisee employees seeking to hold the franchisor jointly responsible for unfair labor practices.

In their claims, the McDonald’s workers allege that the strict regulations and rules contained in the McDonald’s franchise agreement provide the franchisor with direct control over franchisee employees.

The general counsel’s memorandum contradicts several decades of franchise law, including an August 28, 2014 decision in Taylor Patterson v. Domino’s Pizza, LLC by the California Supreme Court that a franchisor was not jointly liable for a franchisee’s claim of sexual harassment.

Franchisors have argued that if the NLRB adopts this new standard, it could require them to exert more control over franchisees and destroy the franchise business model. California franchisees were behind recent legislation that sought to lessen franchisor control over the termination of franchise agreements that prevent franchisees from selling or transferring their ownership rights. That legislation — SB 610 — was vetoed by Gov. Jerry Brown, who said, “The bill’s changes would significantly impact California’s vast franchise industry that relies on the certainty of well-settled laws.”

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