On May 14, 2015 the Texas House passed Senate Bill 652 which states that a franchisor is not the employer of its franchisees or its franchisee’s employees. The bill is in response to recent actions by the National Labor Relations Board and the Board’s expansion of the standards of joint employment in the franchise setting.
The bill would amend Texas law to establish that unless a franchisor exercised direct control over a franchisee or franchisee’s employees beyond what is necessary to protect the franchisor’s brand, the franchisor will not be deemed an employer of a franchisee or a joint employer of the franchisee’s employees. The legislation is similar to the joint employment standard previously utilized by the National Labor Relations Board. The Texas bill addresses employment issues in the context of employment discrimination, wage payment, minimum wage and workers compensation.
The issue of joint employment has been front and center in franchising since the NLRB issued complaints against McDonald’s USA, LLC and franchisees of McDonald’s, as joint employers of the franchisee’s employees, alleging various labor law violations. The complaints are based upon the NLRB’s new standard that by possessing the ability to exercise control over a franchisee’s employment policies (whether exercised or not), the franchisor becomes a joint employer. This standard is a departure from the 30-year-old standard that treat two companies as joint employers only if both exercise a significant degree of control over the same employees.