An appeal filed by the National Labor Relations Board in the 5th U.S. Circuit Court of Appeals in New Orleans may profoundly impact the fortunes of franchise businesses across the country, say sources.
Earlier this year the U.S. District Court for the Eastern District of Texas struck down what is popularly called the Joint Employer Rule, which by the NLRA’s definition pertains to franchise operations doing business in the name of a given company, such as the fast-food giant McDonald’s.
The rule will require, among other things, franchise operations to bargain with labor unions regarding workers’ rights and salaries, much as if they were the company they have received their franchise licenses from.
In a letter sent to President Biden in April by more than 5,300 franchise operators it was stated that the Joint Employer Rule threatens to make life miserable for franchisees through the creation of an “atmosphere of uncertainty and unlimited liability and litigation risk.”
In a vote supporting the franchisees, the U.S. House of Representatives signaled its disapproval of the Joint Employer Rule, an action that was followed last month by the U.S. Senate, which also voted in favor of repealing the rule.
For his part, President Biden has maintained that the Joint Employer Rule promises to “prevent companies from evading their bargaining obligations or liability when they control a worker’s working conditions, even if they reserve such control or exercise it indirectly through a subcontractor of other intermediary.”
There are today more than 806,000 franchise operations in the U.S., up from 697,000 a decade ago. Such operations include everything from ACE Hardware stores to Red Lion restaurants and the roughly 300 Woof Gang Baker & Grooming pet grooming stores.
By far the most prominent franchise success story is McDonald’s, which has around 42,000 restaurants, with more than 90% of those stores operating as a franchise. The company launched its first franchise outlet in 1955.
It is not known when the 5th U.S. Circuit Court of Appeals will issue a ruling in the matter.
By Garry Boulard