Joint Employer Still a Key Issue for IFA on Capitol Hill

Great Clips’ 1,200 franchisees employ close to 40,000 people across the brand’s 4,300 locations, said Steve Hockett, CEO of the Minneapolis, Minnesota-based hair salon brand. “And their employees cannot be our employees,” continued Hockett. “It’s a huge distinction and there needs to be clarity.”

Hockett, along with Taco John’s franchisee Tamra Kennedy and Caleb Brunz, franchise owner of Paul Davis Restoration of Greater St. Paul and Minneapolis, were part of the Minnesota delegation in Washington, D.C., for the International Franchise Association’s Franchise Action Network event today. They were meeting with congressional advisors to Tina Smith and Amy Klobuchar, Minnesota’s senators, seeking to gain support for Department of Labor rulemaking that would establish the legal standard regarding joint employer.

“I don’t want to have my hands handcuffed in how I run my business,” said Brunz in reference to the National Labor Relations Board’s August 2015 ruling in the Browning-Ferris Industries case that adopted a broad joint employer standard based on “indirect” or “potential control” of employees, meaning franchisors can be held responsible for a franchisee’s employees. The NLRB announced plans for rulemaking to resolve the issue under the National Labor Relations Act and the IFA is pushing the Department of Labor to do the same under the Fair Labor Standards Act.

“No offense to the franchisors in the room, but I think we do a better job of hiring and managing our employees,” added Brunz.

The delegation also talked with advisors about a recently introduced U.S. House bill, the Trademark Licensing Protection Act, co-sponsored by Congressmen Steve Chabot (R-Ohio) and Henry Cuellar (D-Texas).

Under the act, “‘brand controls’ will not constitute or be evidence of ‘joint employer’ status in federal or state employment litigation,” according to the IFA.

“For example, plaintiffs’ attorneys have long argued that franchisors are joint employers with their franchisees because franchising systems exercise ‘brand controls’ to protect the value of the brand’s trademark in the public,” read an email from the IFA to members. “Brand controls include things like branded uniforms, food and cleanliness standards, and other standards to ensure the brand is uniform and consistent to the public. Under the Trademark Licensing Protection Act, litigants will no longer be able to use these brand standards against employers in joint employment litigation.”

Kennedy noted that while she shares in the Taco John’s brand, “it’s my job to run my restaurants in my towns,” and so the need to uphold trademark protections shouldn’t be considered evidence of a franchisor’s joint employment of a franchisee’s workers.

In 2017, the House passed the Save Local Businesses Act, which sought to define what it means to be a joint employer, stating the employer must “directly, actually and immediately” exercise significant control over the primary elements of employment to be so considered and thus liable for violations of workers’ rights. The legislation stalled in the Senate, thus the IFA’s effort to push for rulemaking.