News & Noteworthy

Legal Update - Focus on Joint Employer Liability
National Labor Relations Board General Counsel Determines that McDonald's is a "Joint Employer" with its Franchisees
JULY 31, 2014 | Windels Marx - Employment & Employee Benefits

Quick Summary. Corporations that utilize subsidiaries, franchises, subcontractors and temporary staffing companies should consider the impact of an NLRB ruling expanding the notion of "joint employer" status. Joint employers are responsible for compliance with employment and labor laws as the primary employers are themselves.

What is a Joint Employer?

In general, a joint employer relationship may be deemed to exist where two or more businesses exercise some control over the work or working conditions of the employee. Nevertheless, there is no standard definition of a joint employer; definitions vary from state to state, between federal districts and among the applicable laws. The individual facts and applicable law will vary, so employers must analyse their operations on a case by case basis.

Why is this important now?

On Tuesday, July 29, 2014, the Office of the General Counsel of the National Labor Relations Board ("NLRB") determined that McDonald's USA, LLC should be considered a joint employer with its individual franchisee restaurant owner/operators to be named in actions alleging unlawful labor practices, notwithstanding that McDonald's and franchisees are separate corporations and that McDonald's does not directly set wages or working conditions of the employees of the franchisees.

The NLRB's decision is of great significance to the labor practices of franchisors and franchisees, and will also likely have far reaching consequences with respect to other employers' employment practices. Corporations with parent / subsidiary relationships, employers who rely upon staffing and temporary placement agencies, and entities engaged in joint ventures may be affected by the NLRB's position, which will impact the way these companies comply with wage and hour laws, disability and leave requirements, and harassment, discrimination and retaliation in the workplace.

What Should Employers Do to Protect Themselves?

Employers should review their existing corporate structures and agreements to determine whether they are arguably acting as joint employers and, if so, take steps to either modify their arrangements or ensure compliance with all applicable laws and regulations.

With the NLRB signaling its intent to make union organization easier for employees, even non-union employers should review their Employee Handbooks to be sure that they comport with the law concerning an employee's right to union involvement and organization activities. Policies that may inadvertently restrict employees' right to discuss working conditions and compensation should be revised.


Please do not hesitate to contact Scott R. Matthews at (212) 237-1025, or, with any questions or comments.

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