In a recent Advice Memorandum, a National Labor Relations Board (“NLRB”) attorney determined that a franchising company is not a joint employer with its franchisee under both the NLRB’s current standard as well as the General Counsel’s proposed standard for finding joint employer status.
This case involves Freshii Development, LLC (“Freshii”), a fast-casual restaurant chain with more than 100 locations in over a dozen countries. One of Freshii’s franchisees, Nutritionality, Inc. (“Nutritionality”), operates a single Freshii store in Chicago. This dispute arises out of Nutritionality’s termination of one employee and discipline and termination of another employee for attempting to unionize its workforce. The NLRB Regional Office found merit to unfair labor practice allegations regarding the terminations and discipline, but requested advice from the NLRB’s General Counsel as to whether Nutritionality is a joint employer with Freshii.
The NLRB’s General Counsel recognized that under its current standard, the NLRB will find that two separate entities are joint employers of a single workforce if they “share or codetermine those matters governing the essential terms and conditions of employment.” To establish such status, a business entity must meaningfully affect matters relating to the employment relationship “such as hiring, firing, discipline, supervision and direction.”
Applying the current standard to the facts of this case, the General Counsel concluded that the evidence does not establish that Freshii meaningfully affects any matters pertaining to the employment relationship between Nutritionality and its employees. Specifically, the General Counsel noted the following facts that supported its finding:
- Freshii has played no role in Nutritionality’s decisions regarding hiring, firing, disciplining or supervising employees.
- There is no evidence that anyone other than Nutritionality is responsible for determining wages, raises or benefits for its employees.
- The clear language of the franchise agreement gives Nutritionality the power to determine whether to use Freshii’s personnel policies or procedures and states that Freshii “neither dictates nor controls labor or employment matters for franchisees and their employees.”
- Freshii is not involved in Nutritionality’s scheduling and the setting of work hours for its employees.
- Freshii’s control over Nutritionality’s operations is limited to ensuring a standardized product and customer experience.
- The franchisees are not reviewed on their hiring, discipline, scheduling or wage policies.
- Even after Nutritionality’s owner asked Freshii for advice on the labor organization situation, Freshii remained silent and did not interfere or instruct Nutritionality’s owner as to how to respond to the employees’ organizing efforts.
In addition, the General Counsel concluded that Freshii and Nutritionality are not joint employers under the General Counsel’s proposed standard. The General Counsel noted that it has been urging the NLRB to return to its traditional joint employer standard, under which the NLRB finds joint employer status where, under the totality of the circumstances, the putative joint employer wields sufficient influence over the working conditions of the other entity’s employees such that meaningful bargaining could not occur in its absence. Applying this proposed standard, the General Counsel concluded that Freshii and Nutritionality are not joint employers because Freshii does not directly or indirectly control or otherwise restrict the employees’ core terms and conditions of employment, such that meaningful collective bargaining between Nutritionality and any potential collective bargaining representative of the employees could occur in Freshii’s absence.
While this is certainly good news for employers, it should be noted that the Advice Memorandum is non-binding and does not have the effect of creating law. Nevertheless, it may evidence a shift towards a more conservative view of finding joint employer status.