Restaurateurs speak out against NLRB ruling

Aug. 28, 2015 | by Travis Wagoner

Operating a franchise may have become more difficult thanks to Thursday’s ruling by The National Labor Relations Board, which made it easier for workers to unionize under the larger parent company.

The Board ruled that Browning Ferris Industries, a waste management company, qualifies as a "joint employer" alongside one of its subcontractors. The decision loosens standards for who can be considered a worker's boss under labor law.

Although the decision has been in effect for less than 24 hours, many restaurateurs and franchise experts are already worried about what the ruling means for their businesses.

"The most immediate implication is for businesses (large or small) that use contract services," Firehouse Subs CEO Don Fox told QSRWeb. "This ruling is going to be bad for both the contractor (which can be either a large or small business) and the business (large or small) that is utilizing the services of the contractor. Nobody wins in this scenario."

Although Fox said Firehouse isn't directly affected given that it doesn’t contract services, the larger concern is that the NLRB's underpinning for this ruling will be applied to the franchise industry.

"We will be studying the details of Browning-Ferris ruling with that in mind," he said.

National business and franchise attorney Charles Internicola told QSRWeb that the ruling is completely averse to the franchising business model.

"The NLRB decision is predicated upon a finding that both franchisor and franchisee are to be treated as one and the same when it comes to certain employment matters within the scope of the NLRB's jurisdiction," Internicola said. "So at the very least — when it comes to labor issues within the NLRB's jurisdiction — the NLRB has, essentially, cast aside distinctions between franchisor and franchisee, the contractual nature of the franchisor/franchisee relationship and decades of court decisions regarding issues of contract law."

The decision is especially detrimental for restaurant franchises, Internicola said, which may be faced with more stringent control over their operations by franchisors concerned about labor law liabilities.

"Basically franchisee operators may lose independence," he said.

Dave Craig, vice president for human resources for Fazoli’s Restaurants, also thinks the ruling could have long-term negatives effects for the restaurant industry.

"While I am not overly concerned about the impact of this specific case to the restaurant industry, I do worry that these rulings, in general, by the NLRB will continue to erode and jeopardize the longstanding restaurant franchising model, making it easier to eventually apply the same erroneous logic to our industry," he said.

The NRA, too, is displeased with the ruling.

"While we continue to review the NLRB’s ruling, it appears that once again the Board is stacking the deck against small businesses," NRA Senior Vice President of Labor and Workforce Policy and Regulatory Counsel Angelo Amador, said in the release. "The Board is overturning years of established law that has worked to help grow business and feed our economy. The NLRB is already using its new rationale to dismantle the franchisor-franchisee model, which would stifle entrepreneurship and obstruct small businesses’ ability to continue to create jobs in an increasingly challenging economic and regulatory environment."

The restaurant  industry is the nation’s second-largest private sector employer, and 90 percent of restaurants are owned by small business men and women.

"Our industry relies on the vision, innovation and risk-taking of our franchisees to provide opportunities to millions of people," Amador said. "The decision to upend the joint-employer standard will have dire consequences on franchisees' decisions to grow and expand their businesses, jeopardizing economic growth in communities across the country."

 


Topics: Business Strategy and Profitability, Franchising & Growth, Human Resources, National Restaurant Association, Operations Management, Workforce Management



Travis Wagoner

Travis Wagoner spent nearly 18 years in education as an alumni relations and communications director, coordinating numerous annual events and writing, editing and producing a quarterly, 72-plus-page magazine. Travis also was a ghostwriter for an insurance firm, writing about the Affordable Care Act. He holds a BA degree in communications/public relations from Xavier University.


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