February 9, 2015
A looming surge of cases threatens to expand the joint employment doctrine and fundamentally alter the operations of franchisors, retailers, and businesses utilizing independent contractors within the four walls of their offices, warehouses, and storefronts. Businesses should carefully examine their independent contractor and vendor relationships to assess how expanded definitions of joint employment in the labor relations and wage and hour contexts may present litigation risks and impact the bottom line.

The NLRB is poised to fundamentally alter the joint employment doctrine under the National Labor Relations Act. In December 2014, the NLRB General Counsel issued 13 complaints involving 78 unfair labor practice charges against McDonald’s USA, LLC, alleging that McDonald’s and its franchisees illegally retaliated against employees for participating in union-related activities to attempt to increase wages and improve working conditions. Although many of the alleged labor violations were committed by independent franchise owners, the NLRB General Counsel seeks to hold McDonald’s liable for those actions under a novel joint employer theory: one that presumes that a franchisor controls a franchisee’s employment decisions where the franchisor regulates many other aspects of the franchisee’s operations, even if such regulations are necessary to protect the value of the franchisor’s brand. Under this theory, franchisors could be liable for any unfair labor practice tangentially implicating the franchisor’s operational directives. Absent settlement, the initial litigation of these charges will commence in New York on March 30, 2015, followed by proceedings in Chicago and Los Angeles.

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