Houston Chronicle

CHANGEISIN­THEAIR

for your favorite franchises

- By Sophie Quinton | Stateline.Org

F or two years now, Jeff Hanscom has been traveling to state capitols and pitching lawmakers on a simple, if technical, idea: pass a law that says the state won’t consider the people who work at franchises - think McDonald’s cashiers or trainers at Gold’s Gym - to be employed by the franchiser.

Hanscom is a lobbyist for the Internatio­nal Franchise Associatio­n, a business group fighting an Obama-era definition of “employers” that could have big consequenc­es for companies that rely on franchisin­g, contract workers or temporary staff.

His efforts are paying off. Since 2015, 10 states have passed laws that guarantee, with some exceptions, that parent companies won’t be held responsibl­e for franchise owners or workers under state wage and hour and antidiscri­mination laws. Similar bills are currently pending in 11 other states.

A growing number of workers are in an employment relationsh­ip that involves three parties. Franchises from Hilton to Burger King to Planet Fitness employ about 7.6 million people across the country. An additional 4.7 percent of U.S. workers are employed by temporary help agencies or firms that contract out their labor.

Under President Barack Obama, the National Labor Relations Board - which defends employees’ right to form a union and is called the NLRB for short - argued that employers who have indirect, potential control over workers should be considered “joint employers” of those workers under federal law.

This line of thinking may not hold up in court and will likely be reversed under President Donald Trump. But it still sent a tremor through the franchisin­g industry. If it were easier to call franchiser­s joint employers, it would be easier for franchisee workers to unionize across establishm­ents and to sue their parent company over wage and hour issues. The added liability could undermine the whole franchisin­g business model.

Business groups are trying to get additional legal security by making sure the broader standard won’t apply under state law. “To all of a sudden say that franchiser­s are on the hook, or legally responsibl­e, for the employment relationsh­ip between a franchisee and his or her employees would be inserting a level (of control) that doesn’t exist,” Hanscom said.

Critics of the industry-driven state laws say they’re not likely to achieve much, because workers can still sue under federal law.

And those who favor the Obama administra­tion’s thinking on joint employment say it updates labor law to suit the modern economy. Regulators and policymake­rs - at the state and federal level - have to grapple with the growth of nontraditi­onal employment relationsh­ips, says David Weil, the former administra­tor for the Department of Labor’s Wage and Hour Division. “Regardless of who’s in the White House, these changes have happened and continue to spread,” he said.

Federal law defines “employers” broadly and slightly differentl­y depending on the statute. The Obama administra­tion didn’t change existing law. But in 2016, the Department of Labor issued an updated legal interpreta­tion of how federal wage and hour law defines joint employers. And in 2015, the NLRB, which was controlled by Democrats, issued a decision that broadened the definition under collective bargaining law.

The labor relations board’s decision - which is now being litigated - was made in a case that began when contract workers at Browning-Ferris Industries of California, a waste management company, tried to form a union. The board said that BrowningFe­rris’ indirect, potential control over its contract workers was enough to make it a joint employer.

Since 1985, entities have had to actively hire, fire and supervise workers to be considered a joint employer under federal law. The 2015 NLRB decision was a throwback to the broader definition of joint employers that dominated labor law until 1985. In a legal brief, the office of NLRB’s general counsel, Richard Griffin, argued that the traditiona­l standard was legally correct and more appropriat­e for the modern workforce.

“One of the types of situations we say calls out for the more traditiona­l use of the joint-employer standard is the current contingent workforce situation - with temp agencies that provide people not for a day, not for two days, but frequently three or four years,” Griffin said in a 2014 speech to law students.

In his speech, Griffin noted that the relationsh­ip between franchiser­s and franchisee­s is a special case. Franchiser­s have to exert some control over their franchisee­s in order to

protect their trademark and brand. A Domino’s Pizza in Singapore has to be more or less the same as one in St. Louis. So some parent companies dictate everything from prices and menus to how establishm­ents look and workers dress. The board has long ruled that steps taken to protect a brand don’t trigger employer responsibi­lities. But, Griffin said, some franchiser­s do exert employer-like control over franchisee workers. Exhibit A, for supporters of a broader definition of joint employers, is a mega-case against McDonald’s that began in 2012 and is still pending before the NLRB. The board’s lawyers argue that the fast food giant’s strict contracts, scheduling software and centralize­d response to minimum wage protests show that it’s crossing a line and acting like an employer. McDonald’s strongly denies this argument.

Weil, the former Labor Department official, says that some franchises today have such a convoluted management structure that it’s hard to tell who’s employing who. Investors might buy a hotel franchise and hire a third-party manager to run it. The manager might then contract out the daily work of checking in guests and cleaning rooms to other subcontrac­tors and staffing agencies.

Under Weil’s leadership, the department put out guidance that defined two forms of business structure that can be considered joint employment. Weil says the guidance did not include new policy, but merely interprete­d existing law. It was neverthele­ss loudly protested by industry groups who complained that it was confusing and hadn’t been made with sufficient outreach. “I think they oversimpli­fied what we were saying,” Weil said.

For Wyoming state Sen. Ogden Driskill, a Republican, federal wrangling over the definition of employer is personal. He and his wife operate a Kampground­s of America campground franchise on their land near the Devils Tower national monument. “It’s a wonderful program for us,” he said of the franchise agreement.

When the state lodging and restaurant associatio­n approached him about the need to give the state’s franchiser­s and franchisee­s certainty about their employer responsibi­lities, it was an easy sell. The bill Driskill sponsored is short - less than 150 words - and it’s currently sitting on Republican Gov. Matt Mead’s desk awaiting his signature.

Driskill says there’s no corporate meddling in his business. His parent company provides a reservatio­n system and visits periodical­ly to assess the quality of the campground - and that’s about it. “The labor relations board is blurring the line between corporate and franchisee,” he said.

The franchisin­g industry, backed by the Chamber of Commerce and other partners, has been slowly winning support for similar legislatio­n nationwide. The laws also put the brakes on joint-employer lawsuits brought by the state itself. Last year, New York’s attorney general, Eric Schneiderm­an, a Democrat, sued Domino’s Pizza along with three franchisee­s for knowingly underpayin­g workers.

Hanscom says the state push is part of a long-term strategy to write the industry-friendly, narrower definition of joint employer into federal law. “It also helps at the federal level to point to all the action states are taking,” Hanscom said. Tennessee Sen. Lamar Alexander and Minnesota Rep. John Kline - both Republican­s - tried and failed to pass a law in 2015 that would have done just that.

Unions aren’t happy with the franchise industry’s push. “They’re trying to build a legal framework to get out from joint-employer responsibi­lities,” said David Rolf, a Service Employees Internatio­nal Union leader and founder of the Fight for $15 campaign to raise the minimum wage.

With Trump in the White House and business-friendly Republican­s dominating Congress, it’s likely that in a year or so the NLRB will have new appointees who don’t agree with the joint-employer standard described in the Browning-Ferris Industries decision. Trump’s Department of Labor will likely be less aggressive in going after joint-employer cases. And Congress is more likely to pass legislatio­n like the bill Alexander and Kline proposed.

But legal experts caution that it could take years for new members of the labor board to be appointed, consider a similar case and make a decision based on it. The Department of Labor still doesn’t have a secretary. And with Congress currently embroiled in a major fight over health care policy, there’s no telling if or when lawmakers might turn their attention to the joint-employer issue.

“Nothing’s going to happen in the short term at the federal level,” said Chris Wilkinson, a partner at Orrick and former senior civil rights and labor management lawyer for the Department of Labor.

Protests, complaints and lawsuits from unions and dissatisfi­ed workers in complex employment situations are likely to continue. “There are more workers in joint-employment relationsh­ips that are interested in pushing back on the low wages and substandar­d conditions that exist,” said Harris Freeman, a professor at Western New England University School of Law.

And the reasons the Obama administra­tion chose to broaden the joint-employer standard aren’t going away, either. “This is one of a larger set of issues about how the workforce has been transforme­d over the last few decades,” Weil said. If federal and state policymake­rs don’t keep up with changing employment relationsh­ips, he said, they risk leaving many lowwage workers unprotecte­d.

 ??  ?? Days ahead of Andy Puzder’s confirmati­on h downtown New York McDonald’s during the
Days ahead of Andy Puzder’s confirmati­on h downtown New York McDonald’s during the
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 ?? Erik Mcgregor/Pacific Press/Zuma Press/TNS ?? hearing for labor secretary, fast-food workers in the Fight for $15 campaign took their opposition to a lunchtime rush to demand the fast-food mogul withdraw his nomination.
Erik Mcgregor/Pacific Press/Zuma Press/TNS hearing for labor secretary, fast-food workers in the Fight for $15 campaign took their opposition to a lunchtime rush to demand the fast-food mogul withdraw his nomination.

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