NLRB Reverses Joint-Employer Ruling

With labor being one of the biggest line items on restaurants’ balance sheets, it’s important for operators and employees to stay abreast of the labor regulation decisions made at a federal level. Last week, the National Labor Relations Board reversed a significant Obama-era ruling impacting restaurant workforces: 
 
National Labor Relations Board (NLRB) Reverses Joint-Employer Ruling   
On December 14, the NLRB reversed its 2015 joint-employer ruling that sent ripples through the industry. The original ruling redefined the NLRB’s standard for determining joint employer status, asserting that an entity with the potential to exercise control over another entity’s employees—regardless of whether that control is directly exerted—is a joint employer. Therefore, they became obligated to assume responsibility for the other entity’s employment practices, such as participating in the collective bargaining process. The ruling had implications particularly for restaurant franchisors, who required franchisees to apply certain standards for the purposes of consistency or trademark protection.
 
As of last week, this ruling is no longer applicable, as a company will only be considered a joint employer going forward if it has direct control over the workers. This reversal minimizes employers’ exposures to potential liabilities under a joint employer standard. However, it also reduces the leverage given to workers to unionize or challenge franchisors over labor practices. Supporters of the reversal decision, including the National Restaurant Association, believe it will lead to more clarity around employment law for restaurants.
 
Administration changes, by nature, mean no rules or regulations are set in stone. It’s important for restaurant operators to fully understand the discussions and decisions taking place at a federal level, and take a hard look at how shifts in regulation impacts their employment practices.  
 
For questions on evolving restaurant regulations, contact Dustin Minton at dminton@bdo.com. Be sure to keep up with the Restaurant practice’s latest thoughts by subscribing to our blog on the Selections homepage here and following us on Twitter at @BDORestaurant.

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