The April 28 memorandum came from the NLRB's Division of Advice, part of the Office of the General Counsel. It concluded that Freshii Development LLC and a franchise development agent were not joint employers with Freshii franchisee Nutritionality Inc., which operates a Freshii store in Chicago and was accused of firing two employees for trying to unionize its workforce.
Freshii and Nutritionality didn't qualify as joint employers under either existing NLRB law or the new standard proposed by General Counsel Richard Griffin in a separate case involving Browning-Ferris Industries of California Inc. and a staffing agency, according to the advice memo.
However, management-side lawyers said the memo didn't do much to put to bed concerns about the NLRB adopting a new test under which more employers could qualify as joint employers, putting them on the hook for alleged labor law obligations and potentially saddling them with collective bargaining obligations.
"I don't think it's highly significant," Seyfarth Shaw LLP's Marshall Babson, a former NLRB member, said of the memo. "These facts are peculiar to this particular situation."
The NLRB has, since a pair of rulings in 1984, used a standard that treats two companies as joint employers if both exercise a significant degree of control over the same employees. With the Browning-Ferris case, experts say, the board may adjust the standard to require a "totality of the circumstances" evaluation that takes broader account of several factors to determine whether two companies qualify as joint employers.
Griffin has raised hackles in the business community both by pushing for a new test in the Browning-Ferris case and issuing complaints targeting both McDonald's USA LLC and McDonald's franchisees as joint employers.
The International Franchise Association, which referred to the issuance of the McDonald's complaints in December as "the nightmare before Christmas," issued a statement Wednesday from President and CEO Steve Caldeira saying the memo was "welcome news" but calling for "additional transparency."
"Today's announcement clearly demonstrates and validates that more clarity and transparency is necessary by the NLRB to fully explain its rationale as to where the line is being drawn in its attempt to expand joint employer liability at the request of labor unions in the Browning-Ferris Industries case," Caldeira said.
Ronald Meisburg, a former NLRB member and general counsel, said he agreed with the IFA's call for clarity and that the analysis in the memo left open questions about how the current joint employer standard and the one advocated for by Griffin would differ in practice.
The 10-page memo had more than three pages explaining why Freshii and Nutritionality were not joint employers under the NLRB's current standard, and devoted just three paragraphs to analyzing why they didn't qualify as joint employers under the standard advocated for by Griffin.
"It seems to muddy the waters a little bit between the new standard and the current standard," Meisburg said.
Under the general counsel's proposed standard, joint employer status exists when a company has enough influence over the working conditions of the other entity's employees so that meaningful bargaining couldn't occur without that first company being present.
Babson said the memo's discussion of whether Freshii and Nutritionality met the general counsel's proposed joint employer standard seemed "conclusory," and said it would have been nice to see more discussion of what "meaningful bargaining" actually means.
"I think it's much too early to tell what meaningful limits, if any, there are going to be under the proposed new standards," Babson said.
Babson also questioned the memo's characterization of the standard the general counsel is advocating for in Browning-Ferris as the the board's "traditional joint employer standard."
"I don't think that is a fair or accurate description of the proposed new standard," Babson said. Babson and Seyfarth filed a brief in the Browning-Ferris case on behalf of the U.S. Chamber of Commerce urging the labor board to leave the existing standard intact.
Michael Lotito, a Littler Mendelson PC shareholder whose clients include the IFA, said that the advice memo was "helpful" but that a great deal of uncertainty remained.
Lotito expressed concern that the fact-specific analysis the April 28 memo employed would make it difficult for franchisors to know if they would be deemed joint employers.
Taking a nuanced, individualized approach to assessing whether a given company is a joint employer may be intellectually pleasing, but it's "not a good business result," he said.
"Businesses need bright-line rules, which is what we've had for over 30 years in franchising," Lotito said.
The board indicated that a shift might be in the cards when it called for input in the Browning-Ferris case last May on whether the agency ought to stick to its existing joint employer standard, as articulated in the two 1984 labor board rulings, or adopt a new one — and if a new standard is warranted, what it ought to look like.
Lawyers said the advice memorandum didn't diminish their interest in the closely watched Browning-Ferris case and the potentially groundbreaking decision the labor board is expected to issue in the coming months.
"The decision in the Browning-Ferris case is the marquee attraction," said Miller Canfield Paddock & Stone PLC principal Adam Forman. "I think it will be binding and precedential guidance from the board and it will be the law of the land, unless and until it's challenged or changed."
--Editing by Katherine Rautenberg and Kelly Duncan.
