Academic journal article Washington Law Review

An Empirical Study of Fast-Food Franchising Contracts: Towards a New "Intermediary" Theory of Joint Employment

Academic journal article Washington Law Review

An Empirical Study of Fast-Food Franchising Contracts: Towards a New "Intermediary" Theory of Joint Employment

Article excerpt

INTRODUCTION

The "Fight for Fifteen and a Union" movement among fast-food workers and their allies has raised awareness about wage inequality in the United States. Indeed, the 2014 poverty rate for restaurant workers was a whopping 16.7%, in contrast to a 6.3% poverty rate in other occupations.1 Rather than negotiating for better wages and working conditions with economically weak restaurant-level franchisees, the movement aims to affect the practices of what it views as the all-powerful brands-the franchisors.2

From the perspective of these workers and their advocates, the Goliaths of the fast-food industry are the franchisors, not the franchisees. To many, the assessment of who holds the power in this industry is not controversial as an economic matter. Few would dispute the notion that the franchisor brands, not their franchisees, set industry-wide standards. Thus, brands have a superior ability to offset rising wage inequality and to improve working conditions in the fast-food industry.3

And yet, the movement has raised controversial law and policy questions about the legal responsibilities of these fast-food Goliaths under current labor and employment laws in the United States. Should fast-food brands, as franchisors, be legally responsible as "employers" for the wageand-hour violations suffered by the individuals who serve us fast food in their franchised stores, pursuant to the Fair Labor Standards Act (FLSA)? Do they have a legal obligation, under the National Labor Relations Act (NLRA), to bargain with the labor unions representing fast-food workers in their franchised stores?

This Article addresses these timely questions with original empirical research of forty-four contracts between the top fifty fast-food franchisors and their franchisees in 2016.4 It uses a comprehensive review of these contracts, along with jurisprudential analogies to the agricultural context, to support a new theory explaining why some of the Goliaths of fast food may indeed be "employers" for the purposes of the FLSA and the NLRA. Existing theories direct their attention to a franchisor's relations with its franchisee, or with the franchisee's front-line workers. In contrast, the proposed theory redirects attention to franchisor relations with an oftenoverlooked party: the franchisees' supervisorial managers. These managers oversee wages and working conditions of front-line fast food workers on a daily basis. The theory proposes that some franchisors may exert considerable influence over the managers at their franchised stores, who in turn influence front-line workers. In this way, franchisee managers may serve as intermediaries between franchisors and front-line workers such that, in some cases, franchisors are joint employers (along with the franchisee) of front-line workers.

This new "intermediary" theory of joint employment adds analytical rigor to joint-employment determinations in the franchising context. it also shifts the discussion away from the current spotlight on the need to disaggregate direct from indirect forms of influence. Instead, it encourages us to consider franchisor influence over supervisorial managers, be it direct or indirect. in recent years, legislators, executive branch agencies,5 and courts6 have consistently emphasized the direct versus indirect framing of joint employment. For instance, the proposed Save Local Business Act7 aims to limit wage-and-hour law liability under the FLSA, and collective bargaining obligations under the NLRA, solely to entities who exercise "direct and immediate," rather than indirect, forms of influence.8 One of the goals of the proposed Act, as its name connotes, is to protect the viability of the franchising business model.9

The Article challenges the implied assumption of this debate that decision-makers can consistently disaggregate direct forms of influence from indirect forms. Whether intermediary managerial influence represents direct or indirect influence is sometimes a difficult analytical distinction to make, even if only "direct" forms of influence are relevant in joint employer cases moving forward. …

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