14 Business View - November 2014
Opening
Lines
iFranchise Group: NLRB
Challenge is a Paper Tiger
Recent legal and regulatory attempts to redefine franchi-
sors as co-employers with their franchisees, which have
set much of the franchise world on the edge of panic,
will create no negative consequences for the franchise
model, according to iFranchise Group.
At the end of July, the General Counsel of the National
Labor Relations Board announced that, absent settle-
ment, it would issue complaints for unfair labor practices
against McDonald’s as a co-employer with its franchi-
sees. This approach would create larger groups of em-
ployees that are attractive to the recruitment goals of la-
bor unions. The General Counsel’s assertions are in line
with a growing set of challenges to the franchise model
from government entities and organized labor.
“Nothing in the law has changed at this point, and any
future changes are very unlikely to affect the franchise
model,” said Mark Siebert, iFranchise Group CEO. “If the
NLRB indeed brings action against McDonald’s, there are
still numerous legal hurdles (Administrative Law Judge
hearing, full NRLB consideration, federal court appeals)
before the law changes. When all is said and done, the
law will continue to recognize the independent nature of
the franchisor-franchisee relationship. To hold otherwise
would require substantial revisions to the National Labor
Relations Act, The Lanham Act, The Franchise Rule of
the FTC and an overturning of decades of independent
contractor case law. “Franchising as a business expan-
sion tool has always been able to adapt to changing laws
and circumstances. Further, the actions alleged in the
headline-grabbing cases do not epitomize the type of ex-
pert advice those of us in the industry give. For example,
we would never advise a franchisor to advocate its fran-
chisees engage in so-called wage theft by failing to pay
employees for hours worked.”
Siebert said experienced franchise industry profession-
als need to be the voice of reason in light of potential
changes. For example, attorneys for franchisees will
no doubt try to argue that the franchisor is exerting so
much control it must be considered a joint employer with
the franchisee. The first element they will likely turn to
in order to prove their point is the Franchise Operations
Manual. For this reason, the Operations Manual must be
precisely crafted to protect the brand without exerting
too much control over the franchisee’s operations.
“The balancing of competing interests is nothing new
in franchising,” Siebert said, “and franchisors need not
fear, but rather prepare, for a fresh look at their system
standards.”
