A Legal Blog for Franchisors

If Your Company Uses Subcontracted Labor, the NLRB May Find You to Be a “Joint Employer”

Posted in Franchisor

The National Labor Relations Board (NLRB or Board) has just announced its long‑anticipated decision in Browning-Ferris Industries of California, Inc. That case had been pending before the Board since April 2014, when the Board announced that it would reconsider the standards for determining joint‑employer status under the National Labor Relations Act. The Board invited briefs on the issue from the business community, unions, and government agencies. Most observers expected that the decision would favor expansion of the joint‑employer doctrine; the real question was how broadly the net would be cast. The answer is that the new standard is broader and more amorphous than the previous standard, but it could have been worse.

For over 30 years, the NLRB standard has been that in order to be considered a “joint employer,” a company must be shown to “share or co‑determine those matters governing the essential terms and conditions of employment” for a group of employees. In the Browning‑Ferris case, the Board “refined” that standard to no longer require that the company actually exercise the authority to control the employees’ terms and conditions of employment. After Browning‑Ferris, it will be sufficient if the company possesses the authority and control to do so. Additionally, this control need not be exercised “directly and immediately.” Control exercised indirectly—for example, by an intermediary—may be enough to impose joint‑employer status. Obviously, the new standard will cover more employers than were covered under the previous standard. Still, it is a far cry from the standard advocated by unions, which would have imposed joint‑employer status whenever “economic realities” made that status appropriate.

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Seattle’s $15 Minimum Wage: Not Unconstitutionally Discriminatory?

Posted in IFA, Legislation

By now you have likely read that the U.S. District Court for the Western District of Washington denied the International Franchise Association and five franchisees’ motion for a preliminary injunction. The plaintiffs sought the Court’s relief to enjoin the April 1st implementation of the City of Seattle’s minimum wage ordinance. The IFA announced on Friday that the plaintiffs plan to appeal the court’s decision to the 9th Circuit.

The minimum wage ordinance created a $15 minimum wage for businesses located in the City of Seattle. The ordinance set a multi-year phase-in based on the number of people a business employs; small employers have seven years to increase wages and large employers have three years (four years if also providing health insurance). Large employers are defined as companies employing more than 500 employees in the United States and “all franchisees associated with a franchisor or network of franchises with franchisees that employ more than 500 employees in aggregate in the United States.” Small employees are companies that employ 500 or fewer employees.

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Breaking: U.S. District Court Rejects IFA’s Request for Preliminary Injunction

Posted in Legislation

As expected, the United States District Court for the Western District of Washington that heard oral argument last week on the International Franchise Association’s motion for a preliminary injunction against the City of Seattle denied the IFA’s motion and refused to enjoin implementation of the City’s $15 per hour minimum wage ordinance against franchisees.

The Court’s Order dismisses as insufficient the IFA’s evidence of statements by three lawmakers and a member of the Mayor’s advisory committee that appeared to indicate the City’s real intention in imposing burdensome and discriminatory restrictions on small franchised businesses. A copy of the Court’s 43-page order can be found here. More analysis to follow later this week.

The IFA can only appeal the Court’s denial if the Court elects to certify the matter for an interlocutory appeal. Given the Court’s rejection of the IFA’s arguments, such an order is probably unlikely. The case is set to go to trial in October 2015.

Court Appears Skeptical of IFA’s Challenge to Seattle’s $15 Minimum Wage Law

Posted in Legislation

The U.S. District Court for the Western District of Washington heard oral argument today on the International Franchise Association‘s motion for a preliminary injunction against the City of Seattle. The IFA is seeking to enjoin implementation of the City’s $15 per hour minimum wage ordinance against small franchisees. The ordinance, adopted in 2014, requires large employers (defined as those with more than 500 employees) to raise wages at a faster pace than small businesses. The ordinance lumps franchisees affiliated with a franchise network in with large employers, even if the local franchisee only employs a small number of employees. The IFA and several local franchisees filed a lawsuit against the City claiming that the inclusion of franchisees (regardless of size) as a large employer is unconstitutional.

At oral argument, the court appeared to be very skeptical of the IFA’s position, peppering the IFA’s counsel (former United States Solicitor General, Paul Clement) with questions. The IFA submitted copies of emails between Seattle City Council President Tim Burgess and Nick Hanauer, a member of the mayor’s advisory committee, in which Hanauer appeared to acknowledge that the ordinance was intended to discriminate against out-of-state franchised businesses. The court seemed to disregard that evidence, despite the fact that the City submitted virtually no evidence to contradict Hanauer’s views of the law’s intent or the City’s apparent adoption of Hanauer’s views.

The court concluded the hearing by noting that it would try to issue a written ruling by March 17, 2015.