Recent legal and regulatory attempts to redefine franchisors as co-employers with their franchisees, which have set much of the franchise world on the edge of panic, will create no negative consequences for the franchise model according to franchise experts at iFranchise Group.
At the end of July, the General Counsel of the National Labor Relations Board (NLRB) announced that, absent settlement, it would issue complaints for unfair labor practices against McDonald’s as a co-employer with its franchisees. This approach would create larger groups of employees that are attractive to the recruitment goals of labor unions. The General Counsel’s assertions are in line with a growing set of challenges to the franchise model from government entities and organized labor.
“Nothing in the law has changed at this point, and any future changes are very unlikely to affect the franchise model,” Mark Siebert, iFranchise Group CEO said today. “If the NLRB indeed brings action against McDonald’s, there are still numerous legal hurdles (Administrative Law Judge hearing, full NRLB consideration, federal court appeals) before the law changes. When all is said and done, the law will continue to recognize the independent nature of the franchisor-franchisee relationship. To hold otherwise would require substantial revisions to the National Labor Relations Act, The Lanham Act, The Franchise Rule of the FTC and an overturning of decades of independent contractor case law,” Siebert said.
Siebert went on to explain that best practices in franchising are constantly evolving. “Franchising as a business expansion tool has always been able to adapt to changing laws and circumstances. Further, the actions alleged in the headline-grabbing cases do not epitomize the type of expert advice those of us in the industry give. For example, we would never advise a franchisor to advocate its franchisees engage in so-called wage theft by failing to pay employees for hours worked,” Siebert said.
Siebert emphasized that experienced franchise industry professionals need to be the voice of reason in light of potential changes. For example, attorneys for franchisees will no doubt try to argue that the franchisor is exerting so much control it must be considered a joint employer with the franchisee. The first element they will likely turn to in order to prove their point is the Franchise Operations Manual. For this reason, the Operations Manual must be precisely crafted to protect the brand without exerting too much control over the franchisee’s operations. “The balancing of competing interests is nothing new in franchising,” Siebert reminded, “and franchisors need not fear, but rather prepare, for a fresh look at their system standards.”
iFranchise Group is offering a webinar for current and future franchisors on the impact – if any – of recent challenges to the franchise model from the labor arena. This live one hour webinar will take place Monday, October 27, at 11 a.m. Central Time. Although admission is free, pre-registration is required and space is limited. Register here or go to www.ifranchisegroup.com or contact us at (708) 957-2300.