Hunton Employment & Labor Perspectives

On March 9, 2017, a federal appeals court in Washington, DC will hear argument in a challenge to the National Labor Relations Board’s controversial standard, announced in August 2015, for finding two businesses to be joint employers, and thus responsible for each other’s legal liabilities on the labor front.  The labor community is keeping a close eye on the case.  If the NLRB’s standard is upheld, businesses across the country will face the prospect of sharing labor and employment risk with their subcontractors, supply chain partners, and maybe even their franchisees.

President Trump’s surprise victory in November has the business community hoping the NLRB will revisit the standard before the Court even rules.  Many have predicted a rapid rollback of the large number of administrative agency actions that marked President Obama’s eight years in office.  How quickly the Trump administration can effectively address controversial NLRB rulings like its joint-employer standard, however, remains to be seen.

The Board’s Democratic General Counsel, Richard Griffin, will remain in his position until his term ends in November 2017.  Griffin, who used to be the top in-house lawyer for a large international union, not only agrees with the NLRB’s joint-employer standard, but has argued it should apply to franchisors and franchisees.  His case against McDonald’s Corp. and its franchisees has drawn national attention, and there is no indication he plans to drop the case just because the White House has changed hands.  Moreover, the NLRB itself will not reverse Obama-era decisions until it is again under Republican control.  That won’t happen until the President nominates – and has confirmed – two new Board members, whom he has yet to identify.  The bottom line is that it could be a while before precedents like the new joint-employer rule are off the books.

So where does that leave the hospitality community?  Unfortunately, it leaves hotels continuing to grapple with the new joint-employer rule.  And the NLRB is not its only concern.  State and local officials and plaintiffs’ lawyers are now likewise targeting companies with joint-employer claims.  For example, New York’s Attorney General has accused Domino’s Pizza and several franchisees of violating state wage payment laws.  The case could have extremely damaging implications for hotel companies who share systems – such as employee wage and benefit accounting and payment platforms – with their franchisees.  If New York’s Attorney General has his way, simply sharing accounting best practices with a franchisee could make a hotel franchisor liable for employment claims brought by employees of the franchisee.

But the most damaging effect of an expanded joint-employer standard could come on the union organizing front.  It is no secret that labor unions have been pushing the NLRB to expand its joint-employer standard so that it covers franchisors and franchisees.  This is so that unions can demand that franchisors include organizing concessions such as card check and neutrality in their franchising agreements.  This would be a huge boon to labor, which has had difficulty making substantial gains in franchised hospitality brands.

Most major hotel brands will likely play the long game, confident that the NLRB’s August 2015 joint-employer ruling ultimately will be reversed.  Given the shifting political winds in Washington, that is probably what will happen eventually.  It is legitimate, however, to wonder how much damage unions, state attorneys general and plaintiffs lawyers will do in the meantime.