IFA’s Cresanti: Joint-Employer “Existential Threat” to Franchising
Editor’s note: On December 19, the National Labor Relations Board (NLRB) Office of the General Counsel cemented its plan to hold McDonald’s liable as a “joint employer” by issuing unfair labor practice complaints in 43 cases against McDonald’s franchisees and their franchisor, McDonald’s USA, LLC (read that story HERE). Since then, the franchise industry has been abuzz about the implications, which some say constitute the gravest threat franchising has faced in decades.
In the latest news, a federal judge in California last week ruled that Massage Envy Franchising was not a joint employer of the therapists employed at individual locations.
To size up the situation, we spoke with Robert Cresanti, executive vice president of government relations and public policy at the International Franchise Association (IFA). He and his colleagues have begun a massive effort to lobby members of Congress, including organizing direct meetings between representatives and franchise constituents in their districts.
Franchise Times: You must be a busy guy these days. How worried should franchisors and franchisees be about the joint-employer situation?
Robert Cresanti: The industry is under horrific threat. You’ve got minimum wage [legislation], 30-hour work weeks, Obamacare—you’re talking about the death by a thousand cuts. What is happening with joint employer is a completely different thing, and it is an existential threat to this industry. If the NLRB gets its way and wins cases in the long term, franchising goes away and ceases to exist in any semblance of the form in which we know it today. It’s not hyperbole.
FT: What is the motivation behind these rulings?
RC: We are in the crosshairs of a very motivated, politicized process and we have an independent agency that answers to no one that is dominated by a group of political appointees that … have consistently sided and become advocates on the side of trade unions. Trade union membership in the private sector is at historic lows. They need to grow membership … and in order to do that … they need more members, more dues.
FT: What do you expect to happen from this point forward?
RC: My prediction is the unions and the labor movement will find other courts and other forms of appeal and they will menu shop until they get decisions going the other direction. The second outcome is that you have companies like Massage Envy that are franchisors and franchisees having to spend a significant amount of resources and corporate attention on issues that lead them away from growth and opening new stores in the United States.
FT: You’ve mentioned such rulings leading to franchisors being less likely to partner with smaller, less financially secure franchisees. How would that affect the industry?
RC: As you stop taking chances on smaller guys and have to go with incumbents, it puts pressure on the very category of people we’re most proud of—women, veterans, minorities in the business. We’re far more diverse, almost 50 percent more diverse than the standard small business community in the U.S>, and it’s something we should be proud of. This puts pressure on that model.
FT: How long do you see this issue continuing before resolution?
RC: It will be with us at full force, at a minimum, until the next president is elected and maybe years beyond. Literally the only hope we have is that the good people who are franchisees today that have their head down and are trying to make ends meet pick up their heads and consider if their franchisor was forced to cut a deal with a national trade union for how their employees are going to be treated.