When: Thursday, September 14, 2017 8:00 a.m. – 4:30 p.m.

Where: New York Hilton Midtown, 1335 Avenue of the Americas, New York, NY 10019

Epstein Becker Green’s Annual Workforce Management Briefing will focus on the latest developments in labor and employment law, including:

  • Immigration
  • Global Executive Compensation
  • Artificial Intelligence
  • Internal Cyber Threats
  • Pay Equity
  • People Analytics in Hiring
  • Gig Economy
  • Wage and Hour
  • Paid and Unpaid Leave
  • Trade Secret Misappropriation
  • Ethics

We will start the day with two morning Plenary Sessions. The first session is kicked off with Philip A. Miscimarra, Chairman of the National Labor Relations Board (NLRB).

We are thrilled to welcome back speakers from the U.S. Chamber of Commerce. Marc Freedman and Katie Mahoney will speak on the latest policy developments in Washington, D.C., that impact employers nationwide during the second plenary session.

Morning and afternoon breakout workshop sessions are being led by attorneys at Epstein Becker Green – including some contributors to this blog! Commissioner of the Equal Employment Opportunity Commission, Chai R. Feldblum, will be making remarks in the afternoon before attendees break into their afternoon workshops. We are also looking forward to hearing from our keynote speaker, Bret Baier, Chief Political Anchor of FOX News Channel and Anchor of Special Report with Bret Baier.

View the full briefing agenda and workshop descriptions here.

Visit the briefing website for more information and to register, and contact Sylwia Faszczewska or Elizabeth Gannon with questions. Seating is limited.

Since the National Labor Relations Board’s (“NLRB” or the “Board”) 2015 decision in Browning-Ferris Industries, 362 NLRB No. 186, in which it adopted a new, far less stringent test for determining joint-employer status under the National Labor Relations Act (“NLRA”),  employers have been left wondering whether they may be held to be a joint employer of temporary or contract workers that they retain through staffing and temporary agencies.

These concerns have been echoed by employers in other contexts as other agencies, such as the United States Department of Labor (“DOL”) and the Equal Employment Opportunity have taken similar positions, seeking to expand the concept of joint employer with respect to statutes and regulations they enforce. Notably, both the DOL and the EEOC filed amicus briefs in support of the NLRB’s position with the D.C. Circuit Court of Appeals, which is considering whether the NLRB exceeded its statutory authority in Browning-Ferris.

While the loosened standards for determining joint employment remain under consideration by the courts, members of Congress are now seeking to use the power of the purse strings to force the NLRB to discontinue its use of the relaxed standards it adopted in Browning-FerrisLegislation considered yesterday by House Republicans would do away with this expansion of joint employer liability and provide much needed clarity for employers on this issue.

What is the NLRB’s Browning-Ferris Standard for Finding Joint-Employer Status?

The Browning-Ferris decision expanded the definition of joint-employer to hold that if an employer, referred to as the primary employer, merely possesses, but does not exercise, the right or ability to directly or indirectly codetermine the terms and condition of employment of the employees of another employer, referred to as the secondary employer, the primary employer will be held to be the joint-employer of the secondary employer’s employees.

This holding impacts a wide range of workers, such as employees of business arrangements including the use of contractors, retention of personnel through staffing agencies and temporary employment services, and, if the “primary employer is a franchisor, personnel employed by the franchisor’s franchisees. As the Board pointed out when it decided Browning-Ferris, in its view “the current economic landscape,” which includes some 2.87 million people employed by temporary agencies, warrants a “refined” standard for assessing joint-employer status. As the majority put it: “If the current joint-employer standard is narrower than statutorily necessary, and if joint-employment arrangements are increasing, the risk is increased that the Board is failing what the Supreme Court has described as the Board’s ‘responsibility to adapt the Act to the changing patterns of industrial life.’”

While the National Labor Relations Board’s ruling in Browning-Ferris is now before the United States Court of Appeals for the District of Columbia Circuit, where the court has been asked to find that the NLRB’s test is not supported by the terms of the NLRA or the common law definition of employer, which is an element of the Browning-Ferris standard itself, recent activity from House Republicans may result in legislative action establishing a new, far narrower standard for determining joint-employer status.

Congress Seeks to Use the Appropriation Process to Force the Board to Discard Browning-Ferris’s Indirect Control Standard

House Republicans have introduced new language in a draft spending bill – that among other things, would set the NLRB’s appropriation for 2018 – to direct the Board to set aside what many in the business community find to be one of the most objectionable parts of Browning-Ferris.

The House Education and Workforce Committee held a hearing on Wednesday, July 12, 2017 to discuss the barriers to job and business growth created by the “indirect control” standard of joint employer liability. Small business owners and other employer representatives testified that the joint employer standard threatens their ability to expand, and encouraged the committee to introduce legislation that would define employees as those workers that the employer has direct or actual control over.

On Thursday, July 13, 2017, the House Appropriations Committee on Labor, Health and Human Services, and Education voted along strict party lines to approve a markup of their draft spending bill for FY 2018, which would prohibit the NLRB from using the “indirect control” standard in making joint employer determinations and would require the Board to revert to the “direct control” standard. The Appropriations Committee describes the legislation in its press release and on its website as including

two policy provisions to stop the NLRB’s harmful anti-business regulations. The provisions include: A provision that prohibits the NLRB from applying its revised “joint-employer” standard in new cases and proceedings; A provision that prevents the NLRB from exercising jurisdiction over Tribal governments.

This provision, along with the Committee’s proposal to reduce the NLRB’s budget by $25 million (from $274 million to $249 million) will face strong opposition from the Democratic minority, organized labor, unions, and employee lobbying groups. Of course at this point it is not at all clear whether in fact there will actually be a budget for the new fiscal year or, instead, Congress will again adopt a continuing resolution to keep the government running.

What Should Employers Do Now?

Employers and their representatives should of course continue to pay close attention to the budget process and other legislative action, while waiting for Congress to take action on the President’s nominees to the two vacant seats on the NLRB.   There is every reason to believe, assuming Willian Emanuel and Marvin Kaplan are confirmed and take their seats on the Board, that they, like Chairman Philip Miscimarra, who wrote a vigorous dissent in Browning-Ferris, will share the Chairman’s belief that the standard adopted in that case was incorrect and should be set aside. At this time, however, it would be nothing more than speculation to predict when the new Board majority will have an actual case before it in which these issues are present.

In the meantime, employers are advised to review the full range of their operations and personnel decisions, including their use of contingent and temporary personnel supplied by staffing and similar agencies to assess their vulnerability to such action and to determine what steps they make take to better position themselves for the challenges that are surely coming.

Equally critical, employers should carefully evaluate their relationships with suppliers, licensees, and others with which they do business to ensure that their relationships, and the agreements, both written and verbal, governing those relationships do not create additional and avoidable risks.

This post was written with assistance from Sean Winker, a 2017 Summer Associate at Epstein Becker Green.

On April 25, 2017, Dorothy Dougherty, Deputy Assistant Secretary of the Occupational Safety and Health Administration (“OSHA”) and Thomas Galassi, Director of OSHA’s Directorate of Enforcement Programs, issued a Memorandum to the agency’s Regional Administrators notifying them of the withdrawal of its previous guidance, commonly referred to as the Fairfax Memorandum, permitting “workers at a worksite without a collective bargaining agreement” to designate “a person affiliated with a union or community organization to act on their behalf as a walkaround representative” during an OSHA workplace investigation.

The Lawsuit Challenging the Participation of Union Representatives in OSHA Inspections

Two days later, on April 27, 2017, the National Federation of Independent Business filed a  with the United States District Court for the Northern District of Texas, effectively declaring victory in their lawsuit challenging the issuance of the Fairfax Memorandum as being inconsistent with and unsupported by the Occupational Safety and Health Act, and the regulations issued under it allowing for the limited participation of third party experts during OSHA conducted workplace safety inspections.

For readers who have been following this issue and the litigation, the withdrawal of the Fairfax Memorandum and the plaintiff’s decision to discontinue their law suit should come as no surprise. This past February, the court denied OSHA’s motion to dismiss the lawsuit challenging the Fairfax Memorandum and OSHA’s decision to allow the participation of union representatives in non-union workplaces, finding that the plaintiff had “stated a claim upon which relief can be granted,” and that “the [Fairfax Memorandum] flatly contradicts a prior legislative rule as to whether the employee representative” in such a walk-around inspection “must himself be an employee.”

OSHA and the DOL’s Decision to Withdraw the Fairfax Memorandum

Less than a week later, OSHA filed an Unopposed Motion For Extension of time to answer the complaint in the Federation’s lawsuit, explaining to the Court that “the extension of the deadline for defendants to answer is necessary to allow incoming leadership personnel at the United States Department of Labor adequate time to consider the issues.”

The Memorandum withdrawing the Fairfax Memorandum reiterates the requirements of 29 CFR 1903.8 (c) that an employee representative who accompanies an OSHA representative during a walkaround workplace inspection “shall be an employee of the employer,” and that the only exceptions in which a non-employee may participate is “where good cause is shown” and the participation of a non-employee, such as an industrial hygienist or a safety engineer” is “reasonably necessary to the conduct of an effective and thorough inspection of the workplace” in the judgment of the OSHA Compliance and Safety Health Officer conducting the examination. Notably, however, rather than actually stating that the Fairfax Memorandum was inconsistent with the provisions of the statute or the OSHA regulations, the April 25th memorandum simply refers to it as “unnecessary.”

What this Means for Employers

First and foremost, OSHA’s issuance of the April 25th memorandum makes clear that union representatives who are not the certified or recognized bargaining representative of the employees at a facility to be inspected by OSHA have no legal right to participate in such inspections.  Accordingly, it is equally clear that an employer faced with such an inspection at a facility that a union is seeking to organize should understand that the union’s representatives have no right to participate.

An important effect of the withdrawal of the Fairfax Memorandum will be to deny unions a potentially potent tool for organizing. As Judge Fitzwater described in his Memorandum and Order denying OSHA’s motion to dismiss the Federation’s lawsuit in February, unions such as the UAW in its ongoing organizing campaign at Nissan in Tennessee have come to rely upon participation in OSHA inspections as a valuable tool.

No doubt with the confirmation of Secretary Acosta, leadership of the Department of Labor will continue to review and reassess positions and actions taken during the past eight years.

NLRB Acting Chair Philip Miscimarra has given the clearest indication to date of what steps a new Republican majority is likely to take to reverse key elements of the Labor Board’s hallmark actions of the Obama administration once President Trump nominates candidates for the Board’s two open seats and the Senate confirms. In each of these cases, Miscimarra highlighted his earlier opposition to the majority’s changes in long standing precedents and practices.

The Acting Chair’s Position On the Board’s 2014 Amended Election Rules – The Emphasis On “Speed Above All Else” is Inconsistent With the Law

In a strongly worded dissent in European Imports, Inc., 365 NLRB No. 41 (February 23, 2017), the Acting Chair took issue the majority’s decision to deny an Employer’s Emergency Request for Review, that sought to postpone and reschedule a representation election scheduled to take place only three days after a significant number of the employees who would be eligible to vote approximately 25%, learned that they were included in the bargaining unit, and would be affected by the outcome of the vote.

In its Emergency Request, the employer urged the Board to postpone the election by a week, to endure that the employees would know whether they would be eligible to vote and if they were, to allow them to get the facts and make an informed decision when they voted. It also argued that holding the election so soon after the issuance of the Direction of Election “would deprive many employees of sufficient notice that they would be voting in election that would dictate whether they would have union representation.”

Disagreeing with the decision of Members Mark Pearce and Lauren McFerran to deny the employer’s Emergency Request without comment, Miscimarra took issue not only with the denial of this Request, but more broadly, with the Board’s 2014 Amended Election Rule (the “Rule”) and its “preoccupation with speed between petition-filing and the election,” the Rule’s “single-minded standard” calling for “every election (to be) scheduled for ‘the earliest date practicable . . .”

Miscimarra reiterated his position, as expressed in his dissent to the Board’s adoption of the amended Election Rule in 2014, that such an emphasis on speed above all else is inconsistent with the Board’s duty under the National Labor Relations Act “to assure to employees the fullest freedom in exercising the rights guaranteed” by the Act.

The Acting Chair again called for the Board to establish “concrete parameters” for the scheduling of elections that would ensure “reasonable minimum and maximum times between the filing of a representation petition and the holding of an election.”

In addition to addressing issues of timing, Miscimarra also took issue with the fact that during the representation hearing preceding the Direction of Election. The Board’s Regional Director had refused to permit the employer to present evidence and develop a record as to why it was being prejudiced in this case by the 2014 Amended Election Rule. The Regional Director ruled that because earlier judicial challenges to the facial validity of the Election Rule had been dismissed, the employer could not litigate the actual prejudice the Rule caused in this case.

Miscimarra made clear that in his view, the fact that earlier facial challenges to the Amended Election Rule had been dismissed, questions as to the validity of the Rule, when applied to specific facts remains open and that it is a “clear error and an abuse of discretion” to deny an employer the opportunity to litigate such issues when they arise.

The Acting Chair’s Position On the Obama Board’s Handbook and E-Mail Decisions

In another dissent in Verizon Wireless Inc., 365 NLRB No. 38 (February 24, 2017)  Miscimarra reiterated his strong dispute with the way in which the Obama Board has analyzed and decided cases challenging employee handbooks and policies, writing that Board’s current standard for deciding such cases “defies common sense.”

Under the Board’s 2004 Lutheran Heritage standard, the Board will find a handbook provision or policy to violate the Act and unlawfully interfere with employees’ rights to engage in concerted, protected activity if which in part rendered work rules and handbook provisions unlawful if employees “would reasonably construe” them to prohibit protected activities under Section 7 of the Act.

The Acting Chair reiterated his view, as explained in his lengthy 2016, dissent in William Beaumont Hospital, 363 NLRB No. 162, that the Board’s current test is unworkable, and fails to adequately recognize employer’s legitimate needs of employers. Calling on the Board and the Courts to overturn and reject the Lutheran Heritage standard, Miscimarra urged the adoption in its place of a new balancing test that would not only focus on employees’ rights under the Act, but that would also take into account employers’ legitimate justifications for a particular policy or rule, such as attempting to avoid potentially fatal accidents, reduce the risk of workplace violence or prevent unlawful harassment.

Miscimarra also took direct aim in his dissent at the He also wrote that he believes the Board should overturn its Purple Communication decision allowing employee virtually unfettered use of employer email systems and return to the former standard in Register Guard, which recognized that such systems are employer property and should be recognized as such. The dissent described the standard under Purple Communications as “incorrect and unworkable,” and called for a standard that would once again recognize “the right of employers to control the uses of their own property, including their email systems, provided they do not discriminate against NLRA-protected communications by distinguishing between permitted and prohibited uses along Section 7 lines.”

What This Means for Employers

As we noted when the President appointed then Member Miscimarra to serve as Acting Chair of the Board, meaningful change in how the Board interprets and applies the Act will not come until the two vacant seats are filled and a new majority is able to act. Additionally, current General Counsel Richard F. Griffin, Jr.’s term runs through August 4, 2017.

We expect change to come as ULP issues get before the Board. It is to be expected that any new Members appointed by the President will almost certainly share Acting Chair Miscimarra’s views on such issues as use of employer email systems and the review and enforcement of workplace rules, handbooks and the like.  A new balancing test such as that proposed in the Beaumont Hospital dissent is quite foreseeable.

Concerning the Amended Election Rule, things are a bit trickier. The Rule itself was the result of formal rule making, with public comment and input after the Board published its proposed Rule in the Federal Register.  Major changes in the Rule itself would require a new Board to follow the same processes, which are quite lengthy. However, there is certainly room, as Miscimarra’s dissent in European Imports demonstrates, for the Board to make changes in how it administers and processes cases even under this Rule, before any change to the Rule itself becomes effective.  The Acting Chair’s comments concerning the right of employers and other parties to due process, including the right to develop a complete factual record on disputed, material issues is something that can be changed through the administration and application of the Rule even without formal change.  So to, it would not be surprising for a new General Counsel to give guidance to the Board’s Regional Offices calling for them to apply their discretion to avoid circumstances like those that triggered the Emergency Request in European Imports to make sure that there are no more “three day elections.”

Periods such as this, where there is transition in interpretation and enforcement, are challenging but in reality they have been a part of the history of the enforcement and application of the Act for more than 80 years.  Students of the Board often speak of a pendulum and the need for those with business before the Board to try to anticipate its swings.  Careful consideration of not just what the “law” is now, but also what it is likely to be going forward will now once again be the watchword.

 

A New Year and a New Administration: Five Employment, Labor & Workforce Management Issues That Employers Should MonitorIn the new issue of Take 5, our colleagues examine five employment, labor, and workforce management issues that will continue to be reviewed and remain top of mind for employers under the Trump administration:

Read the full Take 5 online or download the PDF. Also, keep track of developments with Epstein Becker Green’s new microsite, The New Administration: Insights and Strategies.

Our colleague Michael S. Kun, national Chairperson of the Wage and Hour practice group at Epstein Becker Green, has a post on the Wage & Hour Defense Blog that will be of interest to many of our readers: “Stop! Texas Federal Court Enjoins New FLSA Overtime Rules.”

Following is an excerpt:

The injunction could leave employers in a state of limbo for weeks, months and perhaps longer as injunctions often do not resolve cases and, instead, lead to lengthy appeals. Here, though, the injunction could spell the quick death to the new rules should the Department choose not to appeal the decision in light of the impending Donald Trump presidency. We will continue to monitor this matter as it develops.

To the extent that employers have not already increased exempt employees’ salaries or converted them to non-exempt positions, the injunction will at the very least allow employers to postpone those changes. And, depending on the final resolution of this issue, it is possible they may never need to implement them.

The last-minute injunction puts some employers in a difficult position, though — those that already implemented changes in anticipation of the new rules or that informed employees that they will receive salary increases or will be converted to non-exempt status effective December 1, 2016. …

Read the full post here.

Our colleague Jeffrey H. Ruzal, Senior Counsel at Epstein Becker Green, has a post on the Wage & Hour Defense Blog that will be of interest to many of our readers: “Decision Enjoining Federal Overtime Rule Changes Will Not Affect Proposed Increases Under New York State’s Overtime Laws.”

Following is an excerpt:

As we recently reported on our Wage & Hour Defense Blog, on November 22, 2016, a federal judge in the Eastern District of Texas issued a nationwide preliminary injunction enjoining the U.S. Department of Labor from implementing its new overtime exemption rule that would have more than doubled the current salary threshold for the executive, administrative, and professional exemptions and was scheduled to take effect on December 1, 2016. To the extent employers have not already increased exempt employees’ salaries or converted them to non-exempt positions, the injunction will, at the very least, appear to allow many employers to postpone those changes—but likely not in the case of employees who work in New York State.

On October 19, 2016, the New York State Department of Labor (“NYSDOL”) announced proposed amendments to the state’s minimum wage orders (“Proposed Amendments”) to increase the salary basis threshold for executive and administrative employees under the state’s wage and hour laws (New York does not impose a minimum salary threshold for exempt “professional” employees).  The current salary threshold for the administrative and executive exemptions under New York law is $675 per week ($35,100 annually) throughout the state.  The NYSDOL has proposed the following increases to New York’s salary threshold for the executive and administrative exemptions …

Read the full post here.

In a two page Order issued yesterday, Senior District Court Judge Sam R. Cummings of the U.S. District Court for the Northern District of Texas ruled that the Department of Labor’s (“DOL”) controversial new Persuader Rule issued in March 2016, and its new Advice Exemption Interpretation, are “unlawful,” and Judge Cummings made permanent his earlier June 27th Preliminary Injunction Order.

The Rule and Interpretation, which now appear to be permanently struck down, would have imposed dramatic changes in longstanding precedents, by requiring public financial disclosure reports concerning payments that employers make in connection with “indirect persuader activities” that were not reportable under the long standing rules, but that would have, if the new rule had not been struck down, would have, for the first time, been considered reportable as persuader activity.

Judge Cummings Has Adopted The Preliminary Injunction And Made it Permanent

In a brief two page Order, Judge Cummings has adopted and incorporated the findings and conclusions in his earlier Preliminary Injunction, in which the Court concluded:

[The DOL is] hereby enjoined on a national basis from implementing any and all aspects of the United States Department of Labor’s Persuader Advice Exemption Rule (“Advice Exemption Interpretation”), as published in 81 Fed. Reg. 15,924, et seq., pending a final resolution of the merits of this case or until a further order of this Court, the United States Court of Appeals for the Firth Circuit or the United States Supreme Court.  The scope of this injunction is nationwide.

District Court Order Provides Employers Comprehensive Victory

The Court’s Order here gives employers a comprehensive victory, finding that the employers and organizations that brought the lawsuit had succeeded in establishing:

  • The DOL exceeded its authority in promulgating its new Advice Exemption Interpretation in the new Persuader Rule;
  • The new Advice Exemption Interpretation is arbitrary, capricious and an abuse of discretion;
  • The new Advice Exemption Interpretation violates free speech and association rights under the First Amendment;
  • The new Advice Exemption Interpretation is unconstitutionally vague; and
  • The new Advice Exemption Interpretation violates the Regulatory Flexibility Act.

This Injunction Appears Likely to Stand

While it is theoretically possible that the DOL could appeal from the issuance of the Permanent Injunction, given the election of Donald J. Trump and the Republican’s continued majority in both the Senate and the House, it appears unlikely that such an appeal will be pursued or that the new Congress would be supportive of the objectives of the now repudiated rule.

Employers Under the Microscope: Is Change on the Horizon?

When: Tuesday, October 18, 2016 8:00 a.m. – 4:00 p.m.

Where: New York Hilton Midtown, 1335 Avenue of the Americas, New York, NY 10019

Epstein Becker Green’s Annual Workforce Management Briefing will focus on the latest developments in labor and employment law, including:

  • Latest Developments from the NLRB
  • Attracting and Retaining a Diverse Workforce
  • ADA Website Compliance
  • Trade Secrets and Non-Competes
  • Managing and Administering Leave Policies
  • New Overtime Rules
  • Workplace Violence and Active-Shooter Situations
  • Recordings in the Workplace
  • Instilling Corporate Ethics

This year, we welcome Marc Freedman and Jim Plunkett from the U.S. Chamber of Commerce. Marc and Jim will speak at the first plenary session on the latest developments in Washington, D.C., that impact employers nationwide.

We are also excited to have Dr. David Weil, Administrator of the U.S. Department of Labor’s Wage and Hour Division, serve as the guest speaker at the second plenary session. David will discuss the areas on which the Wage and Hour Division is focusing, including the new overtime rules.

In addition to workshop sessions led by attorneys at Epstein Becker Green – including some contributors to this blog! – we are also looking forward to hearing from our keynote speaker, Former New York City Police Commissioner William J. Bratton.

View the full briefing agenda here.

Visit the briefing website for more information and to register, and contact Sylwia Faszczewska or Elizabeth Gannon with questions. Seating is limited.

Hoagie Sandwich and ChipsThis past week, Doctor’s Associates Inc., which is the owner and franchisor for the Subway sandwich restaurant chain entered into a Voluntary Agreement (the “Agreement”) with the US Department of Labor’s (DOL) Wage and Hour Division “as part of [Subway’s] broader efforts to make its franchised restaurants and overall business operations socially responsible,” and as part of Subway’s “effort to promote and achieve compliance with labor standards to protect and enhance the welfare” of Subway’s own workforce and that of its franchisees.

While the Agreement appears intended to help reduce the number of wage and hour law claims arising at both Subway’s company owned stores and those operated by its franchisee across the country, the Agreement appears to add further support to efforts by unions, plaintiffs’ lawyers and other federal and state agencies such as the National Labor Relations Board (NLRB or Board), DOL’s own Occupational Safety and Health Administration (OSHA) and the EEOC to treat franchisors as joint employers with their franchisees.

What Is in the Agreement?

While on its face this may sound like a good idea and one that should not be controversial, in reality by entering into this Agreement, which among other things commits Subway to working with both the DOL and Subway’s franchisees, to develop and disseminate wage and hour compliance assistance materials and to work directly with the DOL to “explore ways to use technology to support franchisee compliance, such as building alerts into a payroll and scheduling platform that SUBWAY offers as a service to its franchisees,” and although the Agreement is notable for its silence on the question of whether the DOL considers Subway to be a joint employer with its franchisees, the Agreement is likely to be cited, by unions, plaintiffs’ lawyers and other government agencies such as the NLRB as evidence of the fact that Subway as franchisor possesses the ability, whether exercised or not, to directly or indirectly affect the terms and conditions of employment of its franchisees’ employees, and as such should be found to be a joint employer with them.

Notably, while the Agreement does not specifically address the exercise of any such authority on a day to day basis, it does suggest an ongoing monitoring, investigation and compliance role in franchisee operations and employment practices by Subway and a commitment by Subway as franchisor to take action and provide data to the DOL concerning Fair Labor Standards Act compliance.  In the past, courts have in reliance on similar factors held that a franchisor could be liable with its franchisees for overtime, minimum wage and similar wage and hour violations.

Of particular interest to many will be the final section of the Agreement, titled “Emphasizing consequences for FLSA noncompliance.”  This section not only notes that “SUBWAY requires franchisees to comply with all applicable laws, including the FLSA, as part of its franchise agreement,” but also what action it may take where it finds a franchisee has a “history of FLSA violations”:

SUBWAY may exercise its business judgment to terminate an existing franchise, deny a franchisee the opportunity to purchase additional franchises, or otherwise discipline a franchisee based on a franchisee’s history of FLSA violations.

Will Subway’s “Voluntary Agreement” with the DOL Have Any Impact Beyond Wage and Hour Matters?

As we approach the one year anniversary of the NLRB’s decision in Browning Ferris Industries, it is abundantly clear that not only the Board itself but unions and others seeking to represent and act on behalf of employees are continuing to push the boundaries and expand the application of Browning Ferris.  In fact the Board has been asked to find that policies and standards such as those evidencing a business’s commitment to “socially responsible” employment practices, the very phrase used in the Subway-DOL Agreement, should be evidence of indirect control sufficient to support a finding of a joint employer relationship between a business and its suppliers.

Moreover, the NLRB and unions such as UNITE HERE and the Service Employees International Union continue to aggressively pursue their argument that the terms of a franchise agreement and a franchisor’s efforts to ensure that its franchisees, who conduct business under its brand, can also be sufficient to support a finding of joint employer status.  No doubt they will also point to the Subway Agreement with the DOL as also being evidence of such direct or indirect control affecting franchisees’ employees’ terms and conditions.

What Should Employers Do Now?

Employers are well advised to review the full range of their operations and personnel decisions, including their use of contingent and temporaries and personnel supplied by temporary and other staffing agencies to assess their vulnerability to such action and to determine what steps they make take to better position themselves for the challenges that are surely coming.

Equally critical employers should carefully evaluate their relationships with suppliers, licensees, and others they do business with to ensure that their relationships, and the agreements, both written and verbal, governing those relationships do not create additional and avoidable risks.