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Lawmakers aim to eliminate ‘indirect control’ standard for franchisors and franchisees

ST. LOUIS RECORD

Sunday, November 24, 2024

Lawmakers aim to eliminate ‘indirect control’ standard for franchisors and franchisees

Lawsuits
Missouricapitol

JEFFERSON CITY – Franchises and the companies that award them would run no risk of liability as joint employers under a bill state Senators passed in February. 

It would preclude application of a National Labor Relations Board (NLRB) decision – which holds that two companies act as joint employers if one indirectly controls the other’s workers – to Missouri franchisors and franchisees. 

At a House judiciary committee hearing on March 26, bill sponsor Sen. Bob Onder (R-Lake St. Louis) said 17,000 Missouri businesses operate as franchises. 

He said the indirect control standard is confusing. 

Committee member Ron Hicks (R-Dardenne Prairie), who owns 14 KFC’s and two Taco Bells, said the bill was long overdue.

“I’m not a lawyer but I own franchises and I know franchise law like you wouldn’t believe,” Hicks said. “They (companies) stay out of our business for the most part." 

Rep. Mark Ellebracht (D-Liberty) asked Onder if McDonald’s establishes conduct of its franchises. 

Onder responded that they exercise control over food preparation but they stay out of hiring, hours, promotions, and bonuses. 

Matthew Panik of Missouri Chamber of Commerce and Industry and Brad Jones of National Federation of Independent Business supported the bill. 

Panik said the NLRB is discussing going back to a standard of direct control. 

The committee will take up the bill again on April 2. 

In 2015, the NLRB tossed out four precedents by a vote of three to two. 

“It is not the goal of joint employer law to guarantee the freedom of employers to insulate themselves from their legal responsibility to workers while maintaining control of the workplace,” the majority held. 

Dissenters predicted joint liability for unfair practices and breaches of agreements, as well as secondary strikes, boycotts, and picketing. 

The case before them involved a Browning-Ferris recycling center in California. 

In a bid to organize workers of contractor Leadpoint, the Teamsters claimed Browning-Ferris and Leadpoint acted as joint employers. 

The NLRB’s regional director found Leadpoint was the sole employer. 

It reversed the decision, with the majority finding the direct control standard “out of step with changing economic circumstances.” 

It also found that two or more employers are joint employers if they share or codetermine matters governing terms and conditions of employment.  

The majority held that the NLRB would no longer require that a joint employer exercise authority, but would require only possession of such authority. 

“Nor will we require that, to be relevant to the joint employer inquiry, a statutory employer’s control must be exercised directly and immediately,” the ruling stated. “If otherwise sufficient, control exercised indirectly, such as through an intermediary, may establish joint employer status.” 

The ruling held that the NLRB would make no distinction between direct, indirect, and potential control. The board would find joint employer status “where industrial realities make an entity essential for bargaining.” 

Dissenters wrote that the decision might arise between lessor and lessee, parent and subsidiary, contractor and subcontractor, franchisor and franchisee, predecessor and successor, creditor and debtor, and contractor and consumer. 

But the majority found that, “[n]one of those situations are before us today, and we decline the dissent’s implicit invitation to address the facts in every hypothetical situation in which the board might be called on to make a joint employer determination.” 

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