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Franchisor liability could expand with redefined 'joint employer'

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A proposed change in the National Labor Relations Board's definition of “joint employer” with respect to franchisors and franchisees could significantly expand franchisors’ wage-and-hour and other employment practices liabilities, warns a report issued by Marsh L.L.C. Thursday.

NLRB general counsel Richard F Griffin Jr. determined last year that McDonald’s Corp. should be considered a “joint employer” with its franchisees.

In its report, Marsh states if the new definition is adopted by the NLRB, franchisors “could now be responsible for alleged discrimination, harassment, wage, labor practices and other allegations that previously may have been directed at franchisees only.”

In addition, “Franchisees, in turn, could see a reduction in control or end up out of business altogether,” says the report, “National Labor Relations Board Joint Employer Stipulation Could Change Franchisor Model.”

The report states that a “joint employer” is now defined as “two separate employer entities having direct and immediate control over the essential terms and conditions of employment,” under which a franchisor “is typically not jointly responsible for any liability relating to franchisees’ labor relations policies.”