Franchiser Relationship and Labor Law in the U.S.A

This paper aims to introduce the U.S’s labor laws which have covered franchise relationships. It focus on the decisions of courts & NLRB and labor policies of the U.S. Department of Labor in the era of Obama administration concerning with franchise relationships. First of all, when it comes to Coverall decision in March 2010, Judge W. Young found that Massachusetts franchisees of Coverall had been misclassified as independent contractors under the Commonwealth's misclassification statute and were “employees.” In that statute to avoid employee status, the employer should show that the worker who performs a service for him or her: (i) is free from control and direction in connection with the performance of the service, both under his contract for performance of the service and in fact; (ii) the service is performed outside the usual course of the business of the employer; and (iii) the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed. Focusing on the second prong, Judge Young concluded that Coverall and its franchisees were not in separate and distinct businesses. Secondly the Department of Labor made two important Administrator’s Interpretations that have an important bearing on the situation of franchise relationship; the Employee Misclassification Administrator’s Interpretation, 2015 and the Joint-Employment Administrator’s Interpretation, 2016. The AI of 2015 proposed that when determining whether a worker is an employee or independent contractor, the application of the economic realities factors should be guided by the FLSA’s statutory directive that the scope of the employment relationship is very broad. At the Joint-Employment AI of 2016, the Administrator believes that additional guidance will be helpful concerning joint employment under FLSA and MSPA. This Administrator’s Interpretation (AI) provides guidance on identifying those scenarios in which two or more employers jointly employ an employee and are thus jointly liable for compliance under the FLSA or MSPA. In the field of collective bargaining relations, the National Labor Relations Board (NLRB) also ruled very important new decision concerning with joint-employer doctrine. In the Browning-Ferris decision in August 27. 2015, the National Labor Relations Board refined its standard for determining joint-employer status which could exert a strong influence on collective bargaining relationship between a franchisor and workers employing by a franchisee. According to the new standard, two or more entities would be joint employers of a single workforce if they share or co-determine those matters governing the essential terms and conditions of employment. In determining whether an employer possesses sufficient control over employees to qualify as a joint employer, it would be considered whether he/she has exercised control over terms and conditions of employment indirectly through an intermediary, or whether it has reserved the authority to do so.