Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: Freshii franchisor, franchisee not joint employers, NLRB advises, (May 13, 2015)

By Greg Hammond, J.D.

Freshii Development, LLC, a fast-casual restaurant chain that concentrates on providing fresh and nutritious meal choices, is not a joint employer with franchisee Nutritionality, Inc., the National Labor Relations Board (NLRB) has advised. The NLRB provided its advice memorandum in response to the Chicago region’s request.

Nutritionality entered into a franchise agreement with Freshii to operate a single store in Chicago in November 2010. In 2014, Nutritionality terminated an employee and disciplined and terminated another employee for attempting to unionize the workforce. The Chicago region found merit to allegations Nutritionality engaged in unfair labor practices concerning the terminations and discipline, but requested the NLRB’s advice concerning whether Nutritionality is a joint employer with Freshii.

The NLRB concluded that Freshii and Nutritionality are not joint employers under current Board law or under the traditional joint employer standard. There was no evidence that Freshii meaningfully affects any matters pertaining to the employment relationship between Nutritionality and its employees. Specifically, Freshii played no role in Nutritionality’s decisions concerning the hiring, firing, discipline of, or supervising of employees. In addition, there was no evidence that Freshii screened resumes before forwarding them to individual franchises; was responsible for determining wages, raises, or benefits of Nutritionality’s employees; or was involved in Nutritionality’s scheduling and setting work hours of its employees. Rather, the NLRB noted that Freshii’s control over Nutritionality’s operations is limited to ensuring a standardized product and customer experience.

Additionally, the NLRB found that Freshii and Nutritionality are not joint employers under the traditional joint employer standard, which calls for a totality of the circumstances test. In the instant case, the NLRB found that Freshii does not significantly influence the working conditions of Nutritionality’s employees because it has no involvement in hiring, firing, discipline, supervision, or setting wages.

The International Franchise Association (IFA) was cautiously optimistic about this development. “[The] Advice Memorandum is welcome news for franchises and is a result of immense scrutiny being placed on the [NLRB] General Counsel to disclose his expanded joint employer theory by IFA, dozens of associations in the Coalition to Save Local Businesses (CSLB), and countless members of Congress from both sides of the political aisle,” stated IFA President & CEO Steve Caldeira. “However, the legal battle is not over because an advice memo does not have the effect of creating law, the NLRB might still change its position and adopt a new test when a case comes before it, and other federal agencies…do take a more expansive view of who the employer actually is when it comes to franchising.”

Companies: Nutritionality, Inc.; Freshii Development, LLC

News: FranchisingDistribution