While the NLRB Tries to Change Joint Employer Law, Courts Carry on with Business as Usual

Last year, the NLRB issued a controversial decision that made franchisors “joint employers” with the individual franchisees with whom they had contracts. The decision has the potential to dramatically overturn decades of established laws and greatly affect the franchise model for restaurants and other small businesses that contract with a larger brand name. The NLRB has defended its “joint employer” decision by stating that franchisors have too much control over the independent franchisees they contract with for the franchisees to be considered their own operations.

Thankfully, courts continue to respect the corporate divide between franchisor and franchisee. In a recent case involving a massage therapist who alleged violations of minimum wage laws, Judge Benitez of the U.S. District Court for the Southern District of California ruled that Massage Envy, a corporate franchisor, was not the employer of therapists in its franchisees’ California stores. Although the franchisor set standards, procedures, and rules for local store operators, the individual alleging violations failed to show that Massage Envy was a joint employer with its franchisees. Similarly, the California Supreme Court recently refused to hold franchisor Domino’s Pizza liable in a sexual harassment case initiated by an employee of one of Domino’s franchisees.

Hopefully, though I am doubtful, the National Labor Relations Board will follow the leadership of state and federal court systems, as well as its own decades of precedent, and stop overreaching in an effort to hold two distinct corporate entities liable as joint employers.

Matt Austin is a lawyer based in the Columbus, Ohio office of Roetzel & Andress, LPA who limits his practice to representing employers dealing with labor, employment, and OSHA matters. You can call Matt at (614) 723-2010 or email him at maustin@ralaw.com.