Cornell Professors Call for 21st Century Standard for Franchise System Employment

A National Labor Relations Board ruling that expands the definition of joint employment may well ironically decrease the involvement of franchisors in the franchisees’ employment actions—to the detriment of all parties. In an article published in the American University Business Law Review, Cornell Professors Steven Carvell and David Sherwyn examine the NLRB ruling in the case of Browning-Ferris Industries (BFI). They conclude that the ruling was apparently intended to push employment responsibility up to the franchisor, the opposite of one likely outcome. The BFI ruling involved employee leasing arrangements, but could be interpreted as also applying to franchising systems, effectively making both franchisors and franchisees joint employers of workers. However, Carvell and Sherwyn point out that franchisors might be adept at avoiding this mandate, which would have the negative outcome of reducing the franchisors’ involvement in ensuring lawful treatment of their systems’ employees. They also see another potential negative outcome of the NLRB ruling, which would be to “severely compromise the franchise model.” Instead, they call for a new, contemporary standard to replace a patchwork of common law dating back as far five centuries. The goal would be to allow franchisors expressly to oversee their franchisees’ employment activities to ensure that all employees are treated appropriately under the law, while at the same time retaining the basic relationship of a franchise system, in which the franchisor is responsible for brand management and franchisees are responsible for daily operation of individual restaurants.