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Wage, policy changes creating 'perfect storm' for franchisees, industry attorneys say

Labor attorneys for franchise businesses say the industry is facing a "perfect storm" of attacks from labor regulators and unions.

May 6, 2015

Labor attorneys for franchise businesses say the industry is facing a "perfect storm" of attacks from labor regulators and unions, according to the Washington Free Beacon.

Franchisees are facing pressure from the Service Employees International Union, the Department of Labor and the National Labor Relations Board as investigations into wage practices and potential policy changes are underway.

The NLRB is considering the creation of a new joint employer policy that the industry fears could destroy what they claim are small business operations.

"It’s fair to characterize what’s going on now … as a perfect storm," said Norman Leon, a partner at DLA Piper LLP, in the article.

The NLRB considers franchisees and their brands to be separate entities as long as franchisees operate aspects such as scheduling, hiring, and pay. NLRB General Counsel and former union attorney Richard Griffin broke with the 50 year precedent when he held McDonalds liable for the actions of its franchisees in 2014, according to the article.

"The potential impact … is something many of us have never dealt with before," Leon said. "Under their standard laid out by the general counsel, none of us know where he is going."

Based on the franchise model, small business owners pay corporations such as McDonald’s to operate under the brand. The NLRB is considering changing the longstanding policy of separate entities to recognize both franchisees and franchisors as joint employers.