The issue started with the NLRB’s 2015 decision in Browning-Ferris Industries of California, Inc., 362 NLRB No. 186, which overturned 30 years of precedent and established that employers could be held responsible as joint employers by doing as little as reserving control, or exerting indirect control, over workers of another company. This overturned three decades of precedent that required employers to actually exercise control over workers for another company (rather than merely retain their right to do so) in order to be considered a joint employer. This shift created a significant issue for companies in the franchise industry.
While uncertainty remains at the federal level, Ohio passed H.B. 494 which amended the definition of “employer” in a number of Ohio employment statutes to provide that franchisors are not the employers of their franchisees’ employees unless one of the following is met:
- The franchisor agreed to assume that role in writing, or
- A court of competent jurisdiction determines the franchisor exercises a type or degree of control over the franchisee or the franchisees’ employees that is not customarily exercised by a franchisor for the purpose of protecting the franchisor’s trademark, brand, or both.
This law does not overturn the NLRB or federal law on joint employer issues. It does, however, stop state agencies from applying or extending Browning-Ferris’ joint employer standard to Ohio state laws to wages, workers’ compensation, and unemployment.
For franchisors with employees in Ohio, the impact of the law is that they will likely not be deemed a joint employer of the franchisees’ employees unless they: 1) exercise direct control over them or 2) they expressly agree to have joint employer status under the terms of the franchise agreement or some other contract with the franchisee.
Now is the time to for franchisors to review their franchise agreements to ensure they expressly do not assume a joint employer role with the franchisees. Franchisors should also take the additional step to refuse to exercise direct control over franchisees’ employees.
Matt Austin owns Austin Legal, LLC, a boutique law firm based in Ohio that limits its representation to employers dealing with labor, employment, and OSHA matters. You can reach Matt by calling him at (614) 843-3041 or emailing him at Matt@MattAustinLaborLaw.com.