The Dirt (on Cleaning)

NLRB Ruling Could Affect Franchise Owners’ Liability

NLRB Ruling Could Affect Franchise Owners’ Liability

Tuesday, September 1, 2015/Categories: Workers' Compensation Insurance

The National Labor Relations Board recently changed a labor standard that had been in place for three decades. Now corporations and franchisors are considered joint employers with subcontractors and franchisees, according to The Washington Post.

In the case of the recycling plant Browning-Ferris Industries, the NLRB found that the company was a joint employer with Leadpoint, the subcontractor Browning-Ferris hired to sort the recycled materials. The ruling means that Browning-Ferris (alongside Leadpoint) is obligated to bargain with Leadpoint's employees if they form a union.

It's a significant change, as it gives franchisee and subcontractor employees more collective bargaining power than before. In short, corporations can be held liable for their franchisees' labor law violations, according to The Chicago Tribune.

In the past, a union could only petition the franchisee or subcontractor over labor violations because those are the entities that have direct and immediate control over employment conditions, such as…

  • Hiring workers.
  • Firing employees.
  • Disciplining workers.

But the NLRB ruling means that unions can go directly to corporate owners to leverage for better working conditions and pay from franchisees and subcontractors.

What does this mean for small cleaning businesses? Some think the ruling will hurt those that operate a franchise, stating they will have less control over employment decisions. Let's take a closer look at the issue and see how it may impact your cleaning business.

Will Cleaning Franchisees Still Have Control over Their Business?

If you own an independent cleaning business, the NLRB ruling doesn't really affect you. You're only the employer, and that means you alone are liable for labor law violations, such as misclassifying employees as independent contractors. (You can read more about that in "What Every Cleaning Business Can Learn from this Startup.")

But if you're a franchisee – and many cleaning businesses are – the worry is that the ruling may threaten the franchise model altogether. Instead of calling most of the shots, some conservative commentators assert franchisee owners would just be corporate employees.

While there is no definitive proof that will come to pass, The National Law Review states franchisors…

  • May have an obligation to bargain with a union over terms and conditions of employment.
  • May be more inclined to oversee franchisee practices because they can be held liable for franchisee employment decisions.

If you own a franchise, part of the appeal is that you get to run your own business but you still have support from the franchisor. You benefit from its recognizable name and instant access to marketing materials, which makes getting your cleaning business off the ground easier.

Granted, you don't want the parent company's hands in every aspect of your business, but you are accustomed to following certain brand quirks and management styles. This ruling may mean that your franchisor standardizes some aspects of employment across the board to limit its liability, but if you follow labor laws (e.g., carry Workers' Compensation Insurance for your employees and don't misclassify them as contractors to avoid paying for overtime, employment taxes, and other benefits), perhaps the shift will be less noticeable than some political commentators think. Time will tell.

To learn more about running a cleaning franchise, read "Should I Go Solo or Start a Cleaning Franchise?"

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