Washington - The expansion of American franchise operations has long
fueled job growth, with employment in the businesses increasing 3.4 percent
since 2012, compared to two percent elsewhere. From the model's success sprung
a debate, which intensified during the Obama administration: Just who is
responsible for all these workers?
Labour Secretary Alexander Acosta gave the business
community a clear signal this week, rescinding Obama-era guidelines that
suggested corporations be held more accountable for franchise workers who don
their uniforms.
For decades, franchisers relied on the opposite that
franchisees, who essentially operate as small businesses owners, are solely
liable for the people they hire. The non-binding Obama-era guidance that inched
away from that convention has now vanished from the Labor Department's website,
providing some relief to pro-business circles and irking some worker's rights
groups.
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The removal of the guidance doesn't change the law. But it
signals a stark reversal from the previous administration's efforts to
"expand the application of the laws it enforced to the maximum extent
possible," said Alexander Passantino, a Washington employment lawyer.
"A lawyer - or a court - can no longer point to the
interpretations and say, 'This is what the DOL believes,'" he wrote in an
email.
The Labor Department also emphasized in a statement
Wednesday that employees who feel they are being treated unfairly can still
seek legal recourse.
"Removal of the administrator interpretations does not
change the legal responsibilities of employers under the Fair Labor Standards
Act and the Migrant and Seasonal Agricultural Worker Protection Act, as
reflected in the department's long-standing regulations and case law," the
statement read.
"The department will continue to fully and fairly
enforce all laws within its jurisdiction.” In the United States, workings are
increasingly entering into employment relationships with one than one party.
Hotel, restaurant and gym franchises employ roughly 7.6 million people.
In 2015, the National Labour Relations Board, an independent
body charged with protecting workers' rights in the private sector, asserted
that companies with " indirect " control over employees, or two firms
that "codetermine" terms of employment, qualify under federal law as
"joint employers." Lawyers took that to mean that both franchiser and
franchisee, who both maintain some level of control over employee practices,
were responsible for making sure workers made a legal wage and received
appropriate overtime pay.
That opened the door for litigation. Last year, a group of
McDonald's employees in California
who said they were owed overtime pay sued the corporation - rather than just
the individual franchise owner - and walked away with a $3.75 million
settlement.
Business leaders slammed this outcome. They argued that
opening up corporations to blame for an individual franchise owner's behaviour
would create more uncertainty, raise the price for entrepreneurs trying to get
into the business, and ultimately quash employment opportunities.
The American Action Forum, a right-leaning think tank,
estimated that upholding the NLRB standard would result in a franchise slowdown
that could slash 1.7 million jobs from the private sector. David Weil, an Obama
appointee who led the Labour Department's wage and hour division, said the
Obama-era guidelines didn't change existing statutes, and should not impact job
growth.
"It doesn't change anything in regards to joint
employment," he said. "It was guidance to help employers, and taking
it away makes things more opaque."
Heidi Ganahl, founder of Camp Bow Wow, a web camera-equipped
daycare for dogs, said the Labour Department's thinking tore down the wall
between franchisor and franchisee.
"We had 40 people at corporate, and we had 4,000 people
working at franchises," said Ganahl, who sold the daycare business in 2014
but still serves as an adviser. "All of a sudden we had 4 000 employees to
manage."
The company responded to the potential change in regulatory
culture by turning to investors with deeper pockets - who could run several
locations at once - rather than taking a chance on a small business owner, she
said.
Ganahl added that individual franchise owners had an
interest in maintaining good working conditions."You just don't do well in
business," she said, "if you don't treat them well."
WASHINGTON POST