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What is the effect of the recent legislation on the joint employer issue?

In the wake of the National Labor Relations Board’s (“NLRB”) focus on classifying franchisors to be the joint employer with its franchisees of the franchisee’s employees, several state legislatures are attempting to address how franchisors are affected.

Recall that in August, the NLRB issued controversial Browning-Ferris ruling that reversed a line of decisions stretching back more than 30 years.  Formerly, a “second” employer would have to exert actual control over the other employer’s employees related to the essential terms and conditions of employment (wages, benefits, hiring, firing, scheduling, etc.).  Now, according to the NLRB, a “second” employer only needs the “ability” to control the other employer’s employees, regardless of whether the “second” employer actually utilizes that authority.  The effect of the NLRB’s Browning-Ferris ruling would expand the circumstances in which one company can be held responsible or liable for the conduct of another (in employment matters such as wages and benefits or labor relations such as unfair labor practices). The fear with the NLRB’s actions is that franchisors will be considered the employer of the franchisee’s employees. 

In November last year, the Michigan legislature introduced a series of bills, highlighted by SB 492 and SB 493, that would limit a franchisor’s liability to a franchisee’s employees by amending a number of statutes.  Each of these statutes add language to the statutes to clearly define “employer” and explicitly prevent a franchisor from being considered a joint employer with its franchisee.

Specifically, the bills added language that franchisees are considered the sole employer of the workers for whom they provide a benefit plan or pay wages, except as specifically provided in the franchise agreement.  This clarifies that an employee may only seek compensation or redress from the franchisee for whom he or she directly works, and not from the franchisor.  An additional piece of legislation clarified the specific circumstances under which a franchisee and franchisor to employer are considered joint employers. 

In December, the House and Senate passed these bills and the Governor signed them late in the year.  This Michigan legislative reaction to the NLRB’s recent actions is only one of a number of states seeking to minimize the NLRB’s controversial decisions.  This joint employer issue promises to continue to be a “hot button” issue throughout 2016.

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