New Day: One Franchisor’s Journey Responding to Joint Employer

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An executive from a major franchise brand details how the company put in place practices to react to NLRB’s expanded definition of joint employer.

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By An Unidentified Franchise Executive
 
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When I first spoke with my franchise attorney about writing this article, he told me not to. He was concerned that by sharing what we are doing to protect ourselves from being deemed a joint employer of our franchisees’ employees, I would be putting a target on our brand; the last thing we want is to draw the attention of the National Labor Relations Board or the U.S. Department of Labor (DOL). As a result, this article is submitted without my name and the name of my franchise brand has been changed to a fake brand named “SuperDuperBrand.”
 
I have been in franchising for over two decades. I have worked for four different franchising companies. All four were business format franchisors that provided a strong brand, operating procedures, marketing, tools, training, and resources to help their franchisees optimize their success. None of these four companies ever exercised any control over their franchisees’ employees.
 
As a CEO focused on supporting franchisees to provide them the best brand, operating systems, marketing, training, tools, and support, I have had to modify what we do and how we provide service and support due to the NLRB and DOL expanding the definition of joint employer. 
 
Our first “wave of changes” occurred in 2014 when the franchising community learned that NLRB was considering expanding the definition of joint employment. My company — like most franchisors — took actions to further ensure that we would not be deemed a joint employer. These changes included modifying our franchise agreement; modifying our operations manual, especially in regards to staffing models to make it clear that such models or guidance were recommendations/best practices rather than directives; drastically reducing training of franchisees on employment and HR matters; adding disclaimers to many documents; changing the “Job Posting” section of the brand website to clearly delineate what is an open position with the franchisor versus franchisees; removing the company logo from the template employee policy manual and job application artwork; and, providing repeated training for all franchisee-facing employees to ensure that they not get involved in any employment/HR advice or support for franchisees. We also required that the “Independently Owned and Operated” disclaimer was not only on the front door of each franchised outlet but also on the customer-facing side of the point-of-sale system and on franchisees’ business cards. Finally, we made this disclaimer larger and more prominent on all franchisees’ websites.
 
Then, in August 2015, NLRB expanded the definition of joint employer in a decision in the Browning-Ferris case. For the 30 years prior to August 2015, the definition of “joint employer” required an employer must not only possess the authority to control employees’ terms and conditions of employment, but must also exercise that authority, and do so “in an actual, direct and substantial manner” in order to be considered a joint employer. In the Browning-Ferris case, however, NLRB expanded the definition of joint employer and introduced a new standard that no longer requires an employer to exercise control over employees to be considered a joint employer, but instead, only  indirect control or potential control is sufficient to support of finding of joint employer liability. 
 
This expanded definition required even further changes to how we operate as a franchisor in order to protect the company from being deemed a joint employer. Since any joint employer investigation will include interviews with franchisees and franchisees’ employees, we took additional steps to protect ourselves, with a special focus on the perceptions of franchisees and their employees. 
 
We sent a certified letter to all franchisees in early June 2016 that explained the changes we were making that would be effective July 1, 2016; for this article, we are calling this letter the “new day” letter.
These changes include requiring a 12 by 18-inch notice posted by all required government regulatory posters that states “You are an employee of (insert franchisee’s corporate name here), not SuperDuperBrand, Inc. SuperDuperBrand, Inc. requires franchisees to be aware of and comply with SuperDuperBrand’s brand standards, but does not dictate or control hiring, discipline, supervision, benefits, wages or the day-to-day operation of your Employer’s SuperDuperBrand franchise. Always consult with your employer for all questions relating to your employment and any other matters regarding the operation of the SuperDuperBrand location.”
 
SuperDuperBrand provides extensive training to franchisees and some training to franchisees’ employees. Another change outlined in the “new day” letter is that any franchisees’ employee who will participate in any in-person training, whether at SuperDuperBrand’s corporate office, at the annual convention or sales conference, or in the field with a Business Consultant (our title for our field staff that visits franchisee locations to provide service, support and ensure compliance with brand standards) must sign the Employee Training Acknowledgement Form. This form must be signed for each training event the morning that training event begins. The form states “I understand that I am receiving training in my capacity as an employee of (insert franchisee’s corporate name here), my Employer, a SuperDuperBrand franchisee. I understand that I am not an employee or joint employee of SuperDuperBrand and that any training, guidance or tools that I receive from SuperDuperBrand’s trainers or employees is designed to train me in brand standards and procedures in order to ensure that customers of SuperDuperBrand locations receive consistency in products and customer experience at each franchise location. I understand and acknowledge that SuperDuperBrand did not hire me, is not my employer, is not responsible for my wages, benefits or supervision and does not control any of the terms or conditions of my employment with my Employer.” The form also includes the name of the training session attended, the date of the training, the employee’s name and the employee’s signature, and the SuperDuperBrand’s address and franchisees’ name(s). We are clear with franchisees and franchisees’ employees that any training offered that is attended by a franchisees’ employee is optional and at the discretion of the franchisee; none of the training we offer for franchisees’ employees is mandatory for a franchisees’ employee to attend.
 
We also offer online training modules for franchisees and franchisees’ employees. Similar to the Employee Training Acknowledgement Form, in order to begin any online course on our intranet, the franchisees’ employee must click “agree” to an online form similar to the Employee Training Acknowledgement Form before an online module will begin.
 
We also reduced our interactions with franchisees’ employees. While never acting in a management or supervisory capacity with franchisees’ employees, our team — including our Business Consultants and Marketing Services Managers during visits to franchisee locations — would interact with franchisees’ employees, including answering questions and training on our point-of-sale system; answering operational questions; observe operations and give tips for enhanced productivity and efficiency; train front line staff on customer service skills, upselling and cross selling; etc. Unfortunately, due to the expanded definition of joint employer, we have eliminated this valuable support that helped maintain our brand standards and enhance the customer experience. The National Labor Relations Act (NLRA) allows us to speak with/interact with a franchisees’ general manager without risk of being deemed a joint employer; much of the NLRA is designed to allow employees to freely organize into collective bargaining units and management is not protected by the NLRA. Most of our franchisee’s locations employ less than 10 employees. We created a General Manager/Key Management Employee Designation Form so a franchisee could specify one (and only one) General Manager or Key Management Employee per location. We updated our databases so every one of our employees knows immediately who the franchisee(s) are and, if the franchisee has specified one, who the General Manager/Key Management Employee is. This lets our team know they are allowed to interact with this key management employee. The form reads “In accordance with my franchise agreement, this is to verify and validate that I designate (enter employee’s name here) as my General Manager/Key Management Employee to devote his/her full time, best efforts and personal attention to the day-to-day management and operation of the SuperDuperBrand location number __.” The franchisee signs and dates the form. Any of our corporate team that is in contact with a location knows who they can interact with (the franchisee and the Key Management Employee) and who not to interact with (any other employee). In the past, our Business Consultants would often introduce themselves to every employee and give them one of their business cards with a comment such as “call me if I can bring value;” that interaction no longer takes place.
 
Other changes include discontinuing the use of the term “franchise partner” and using the term “franchisee” instead. 
 
We use a third party profile assessment designed to measure if a potential employee has the right behavioral profile for a specific position in the SuperDuperBrand business based on successful employees in that position; we no longer interpret these profiles for franchisees, which was a valuable service to help franchisees select the right people. 
 
When a franchise asks our opinion regarding whether a specific employee should be coached or disciplined or if a compensation package makes sense, we tell then we cannot answer the question. 
We have IT and Tech Support Desk people to answer franchisees and franchisees’ employees incoming telephone calls with questions on our systems and how to use specific equipment and software to produce the products that SuperDuperBrand locations sell. Now the caller hears the message “Any information provided on this phone call is for quality and conformity with SuperDuperBrand’s brand standards in operating SuperDuperBrand locations” before the call goes through. This is designed to communicate to a franchisees’ employee who calls that SuperDuperBrand, Inc. personnel are not acting in a supervisory or employment capacity. 
 
In our weekly email newsletter that includes product, service, marketing and training information, we now include the words “All training SuperDuperBrand, Inc. offers to employees of SuperDuperBrand’s franchisees’ employees is optional and designed to train franchisees’ employees in brand standards and procedures” on the bottom and all articles regarding any training include a footnote to this message. The objective of this is to inform franchisees’ employees that we are not their employer and training is optional. 
 
In our bi-monthly magazine that is mailed to every location, we include the following: “The SuperDuperBrand Gazette is a magazine created by SuperDuperBrand, Inc. that is distributed to SuperDuperBrand franchisees for the purpose of providing information to help franchisees operate and grow their business. It is a private publication that is not shared with vendors, the media or others outside of the SuperDuperBrand network. If you are an employee of a SuperDuperBrand franchisee that works in one of the over 800 independently owned and operated SuperDuperBrand locations and are reading this magazine that your local franchisee employer has provided to you, you do so acknowledging that you are not an employee of SuperDuperBrand, Inc. and that you are reading it with the consent of your employer, the franchisee. Direction to act on anything communicated in the magazine will be at your franchisee employer’s sole discretion.”
 
I am sharing all of this with you so that you can take these ideas (and perhaps these ideas will lead to better ideas for your business), discuss them with your attorney, and use what fits your business. And, with some luck and grassroots advocacy, with the new Trump administration and Republican majorities in both houses, maybe we can get a law passed to return to the prior definition of joint employer and protect the franchise business model. I encourage you to get your franchisees involved with the Franchise Action Network (FAN) so they can be active in the grassroots advocacy needed to get the law changed. 
 
Editor’s Note: The author of this article is not identified in order to provide an accurate snapshot of how franchisors are dealing with the expanded joint employer definition. 
 

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