NLRB Ruling Impacts Franchising - Existential Threat?

If you haven't heard a controversial stand by the National Labor Relations Board has franchise-industry advocates and the International Franchise Association (IFA) in a tizzy. Franchise Times has done an exemplary job of reporting on this - here and here - so I won't recount it all.

Suffice it to say that the NLRB is trying to hold franchisors, like McDonald's, responsible for alleged employment and labor violations as a "co-employer" or "joint employer" of their franchisEE's employees.

What caught my eye, however, is the comment by Robert Cresanti, executive vice president of government relations and public policy at the IFA, made in the Franchise Times' recent article, "IFA’s Cresanti: Joint-Employer “Existential Threat” to Franchising." Mr. Cresanti reportedly said: "What is happening with joint employer is a completely different thing [from "the minimum wage, 30-hour work weeks, Obamacare"] 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."

An existential threat? Not hyperbole? Sounds downright devastating. Except it may be just a tad bit exaggerated.

I am sure that Mr. Cresanti is an excellent advocate for all of franchising. But to say that franchising "goes away and ceases to exist in any semblance of the form in which we know it today," while attention-getting, goes too far.

There is no question that this is an important issue and I support the opposition to the NLRB's folly. In fact, there is likely no one in the franchise community - franchisees, franchisors, executives, or lawyers for franchisees or franchisors - who supports this wrongheaded notion. It simply ignores centuries of corporate and commercial law.

An "existential threat" it is not. Franchising as a business method is stronger and more accepted than ever. We still have a long way to go before the NLRB stance prevails in the court system, commercial marketplace and state and federal legislative bodies ... and my money is on the franchise industry.

And, even if the NLRB somehow prevails, my money is still on the franchise community to find a business solution to deal with the unwanted change. Franchising is a resilient economic force that will survive this challenge.

So, for everyone in a panic out there, I quote Aaron Rodgers ... "Relax."

Jim Meaney is a lawyer with Zaino & Humphrey, LPA in Columbus, Ohio who has represented franchisors and franchisees for nearly 30 years. Jim is a co-author of “Starting a Franchise System: Practical Considerations, Planning and Development” and author of How to Buy a Franchise. 

Visit www.fddlawyer.com or www.ohiofranchiselawyer.com for more information or contact Jim directly at 614.975.9876 or jmeaney@zandhlpa.com.