The Building Tradesman Newspaper

Friday, May 20, 2016

New GOP scheme snubs NLRB, limits franchise liability

By The Building Tradesman

LANSING, Mich. (PAI)—Tucked into a batch of anti-worker laws the Republican-run Michigan legislature approved late last year is a little-known statute that protects franchise granters – think McDonald’s headquarters – from responsibility for dealing with workers and from obeying labor law, including the right to unionize, at their local franchise-holders.

In doing so, the lawmakers also directly challenged the National Labor Relations Board.

The anti-union law was one of six passed late last year and signed by right wing GOP Gov. Rick Snyder, legal blogs said. Two took effect on March 23. The others start on May 22.

All react to a National Labor Relations Board (NLRB) decision – which businesses are now challenging in court – holding local franchise-holders and franchises’ corporate headquarters jointly responsible for labor law obedience, and labor law-breaking.

That NLRB ruling also lets the franchise workers organize. There are 500,000 franchise workers in Michigan and millions of franchise workers nationwide.

The NLRB says the franchise grantors exercise so much control over the local franchise holders, on everything from use of corporate logos to uniforms to products to prices, that the franchise grantors are “joint employers” with them on everything, including labor relations.

That means if the local McDonald’s breaks labor law during an organizing drive, McDonald’s headquarters is on the hook, too. But in Michigan, the legislature said “no.”

One new Michigan law says the franchisee – the local McDonald’s – is “the sole employer” of its workers, unless its own agreement with headquarters “provides to the contrary.” That law took effect March 23.

In light of the new law, a number of management attorneys were advising their franchised clients to sharply delineate franchise and franchise holder duties to clearly provide that the franchisee is the sole employer.

"Considering that a standardized consumer experience is the primary goal of franchised systems, and that indirect controls are common in franchise operations, the risks to the franchise model are obvious," said an advisory from the Detroit law firm Dickinson-Wright.

Other laws in the pro-corporate package excluded the franchise grantor – McDonald’s headquarters, to continue with that example – from being responsible for the local franchise holders’ compliance with the state’s Employment Security Act, its Workforce Opportunity Wage Act, the Michigan Occupational Safety and Health Act, and the state’s Payment of Wages and Fringe Benefits Act. Those laws exempting the headquarters of franchises take effect May 22.

A final law dumped workers’ comp responsibility onto the local franchise holder, “unless the franchisee and franchisor share in the determination of or codetermine matters governing the essential terms and conditions of the employee's employment" and both the local franchise-holder and corporate headquarters “directly and immediately control matters relating to the employment relationship, such as hiring, firing, discipline, supervision, and direction."

Two right wing anti-worker lobbies, the National Restaurant Association and the National Federation of Independent Business, pushed hard for the anti-worker laws, the blogs said.