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Don’t panic over ‘joint employer’ news


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Rhoda Olsen, CEO of Great Clips, has grown the Minneapolis-based chain to 3,600 salons. But she hasn’t lost touch with the people who truly deliver the “brand promise,” as franchising execs like to say, in her case the stylists cutting hair.

“As you get large, one of the things you forget is the people actually delivering the services every day. And the fact is you don’t do s*** in the home office,” Olsen said. 

She’s one of my favorite franchise bosses because she tells it like it is—no overly managed corporate-speak for her. And she didn’t disappoint on a recent panel, sponsored by the law firm Faegre Baker Daniels. 

The panel convened just after the National Labor Relations Board’s general counsel said they’d hold McDonald’s liable as a “joint employer” for alleged franchisee workplace transgressions. The level of panic in the room—and all around the country—was high. 

Here we have a war on franchising, the rhetoric goes, that will tear down the entire business model. Franchisors should never speak to their franchisees’ employees again, panicked attorneys are advising, nor do anything else that could paint them as liable for what happens in the workplace.

But there was Olsen, confidently detailing what her executive team does to bolster operations in the salons, even among the front lines. “What’s she’s saying is making me very nervous,” said one litigation-minded audience member after her talk. But I believe Olsen offers a common-sense voice amid the latest hubbub.

For one, Great Clips launched three years ago a system-wide job site to recruit stylists and managers. Franchisees pay a modest fee to participate, $10 a month, and applicants apply online. Based on their zip code, the system notifies the appropriate salon and the franchisee takes it from there.

The system has generated “tens of thousands” of applicants, Olsen says, but corporate doesn’t know what happens afterward. “We don’t know about the interviewing and hiring, we don’t know if they get hired,” she told me in an interview after the panel. “And that’s probably a good thing, given the NLRB decision.”

For another, Great Clips works with a third-party vendor on a scheduling system that uses system-wide data to recommend guidelines to franchisees. For example, if a store is offering a $6.99 haircut special, corporate knows their business is going to increase 40 percent, and the system will suggest an increased schedule to match.

Also based on systemwide data, Great Clips believes 30 percent of all the salons’ scheduled hours should be on Saturday or Sunday. “That’s not a requirement, but those are guidelines to serve the customer better,” she says. In both cases, the actual schedule is still up to the individual store. 

“It’s not a requirement, but we do recognize people who accomplish those milestones,” Olsen says, adding she believes in the power of data. “We think much of the strength of franchising is the system-wide information.”

For a third, she and other execs are on the road constantly, visiting salons and, yes, talking to people who actually work there—again, in defiance of the recommendations making the rounds right now. “Our culture is one of our really great assets. Our culture is very down-to-earth, very collaborative, very friendly, where I can walk into a salon and talk to the stylists,” she says. “It’s just about the value of everyone in our organization.”

She emphasizes execs never provide direct instructions to franchisees’ employees, even to the general manager. “I think we’ve always been very clear that the franchisees have control over their employees. We would never intervene directly with the employee. We would always go back to the franchisee, and have them decide what to do.”

‘Take a breath’

Of all the advisories put out by lawyers since the NLRB’s bombshell “joint employer” ruling—a very long list with very dire predictions—my favorite was from PlaveKoch.

The subject line read: “Worry but don’t hyperventilate (yet),” and offered 10 “practical tips for action items to consider,” by Lee Plave, name partner of the Reston, Virginia-based firm.

Reached by phone, Plave elaborated on the rhetoric. “There are a lot of people who commented, and their comments were ready, fire, aim,” he says. “I don’t want to cast any aspersions, but they said, ‘This is horrible, this is the death knell of franchising, and now I have to go read the opinion.’ 

“I wouldn’t diminish this, nor diminish the potential for havoc that it has, but let’s just take a breath and recognize where we are and where we’re not.”

Of the 10 tips his firm outlined, he discussed three “that have less to do with the franchise agreement and more to do with the way the franchisors operate their business,” he says. “Franchisors have always been well advised to be careful about the third rail of franchisee-employee relations, so they don’t touch that relationship.”

First, be sure employees don’t mistake their employer—it’s the franchisee, not the franchisor. Don’t let franchisees use the brand’s corporate logo on paychecks, for example, or use the company’s name in their corporation’s name.

Second, franchisors should steer clear of such actions as collecting applications, evaluating prospective employees, or participating in hiring and firing decisions. Third, when the franchisor’s team is on site, avoid directly communicating with line-level employees, but rather communicate through management. 

Overall, Plave says, keep running your business. “Don’t let the NLRB statement and these other things stop you from doing the right thing.”

Shelley Spandorf, a partner with Davis Wright Tremaine in Los Angeles, agrees the NLRB statement itself is a “non-issue,” in that “there’s a really long haul and a series of successes the NLRB will have to achieve” in order for the joint employer decision to stand. “But the handwriting is on the wall,” she says. “What we’re telling our clients is the spotlight is clearly on franchise practices.”

She points out SB 610, which surprised many by passing in August in California despite intensive lobbying against it by the International Franchise Association, as yet another win by unions and others who want to tear apart the franchising model.

What is she advising her clients? “I’ve always told my clients that they should never provide their franchisees with a template employee handbook,” she says. “There are plenty of third-party companies that handle payroll and other outsourced employment functions. Give the franchisee the choice that there are these outside resources, but don’t be the resource.” 

She also advises against screening or approving franchisee hiring decisions, something she believes “many” franchisors do. (Spandorf has written an article with 12 tips for franchisors; email rochellespandorf@dwt.com for a copy.)

Wake-up call

In other words, keep calm and carry on, which may be a paraphrase of Great Clips’ Olsen. She knows her approach runs counter to some of the advice from lawyers, and was aware of that fact even while presenting on the panel. “It’s funny, because I knew even as I was saying that, that someone was going to react,” she says. 

Nor does she ignore what’s going on, whether the NLRB decision, minimum wage battles around the country or “fair franchising” legislation in California like SB 610.  “I think it’s concerning, but I don’t think it’s that dire,” she says. “The isolated cases should give us opportunities to prove the franchise model without the whole thing falling apart.”

She suggests all franchisors should check to see if their practices are controlling franchisees too much. “This may be a good wake-up call for organizations to make sure they keep that line clear,” Olsen says. 

Beth Ewen is managing editor of Franchise Times. Send interesting legal and public policy cases to bewen@franchisetimes.com.

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