Category Archives: In The News

Administrative Law Judge Rejects Settlement Between NLRB and McDonald’s

by Amanda Doran Dempsey

Last week, Administrative Law Judge Lauren Esposito rejected a settlement agreement between the NLRB and McDonald’s in its pivotal joint-employer case. This case originally began when the NLRB filed charges, asserting that McDonald’s was liable for several labor law violations committed by its franchisees through a joint-employer theory. In her decision, Judge Esposito reasoned that the settlement agreement lacked “a reasonable resolution based on the nature and scope of the violations alleged and the settlements’ limited remedial impact.” The settlement agreement allowed McDonald’s to maintain its position that it was not liable or responsible for the labor violations of its franchisees. McDonald’s released this statement in response to the decision:

“The NLRB General Counsel, McDonald’s USA, and various franchisees negotiated a settlement agreement that is fair, reasonable, and provides the opportunity now for full and complete relief to all current and former franchisee employees affected by the litigation.”

McDonald’s also stated that it will be exploring their options to appeal this decision or work with the NLRB general counsel to reach a new settlement agreement before Esposito makes her final decision on the case.

McDonald’s was hopeful that Judge Esposito would approve the settlement in order to avoid a broad precedential decision that would force franchisors all over the country to rethink the way they operate their franchises. If this case ends in a ruling against McDonald’s, it would expose franchisors to far more liability for the actions of franchisees with respect to employment issues.

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Supreme Court Rules 4-2 in Favor of Beverage Tax

by Kamron Abedi

On January 1, 2017, the City of Philadelphia became the first major U.S. city to impose a tax on sweetened beverages. The City’s new 1.5 cent per ounce tax on distribution of sweetened beverages includes everything from soda to juices, to Gatorade. Local retailers, restaurants, and businesses challenged the tax citing that it was a form of double-taxation because the beverage tax was being passed along to consumers who already pay sales tax on sweetened beverages.

On Wednesday, the Pennsylvania Supreme Court disagreed with the businesses and retailers who oppose the tax and upheld the tax in a 4-2 decision. The Court reasoned that the local beverage tax is permissible because, pursuant to the Sterling Act, localities are allowed to tax anything the state is not already taxing. The Court similarly found that the beverage tax did not violate the Sterling Act since the tax is imposed on distributors and not retail sales where there is state sales tax involved. In his majority opinion, Chief Justice Saylor wrote, “The legal incidences of the Philadelphia tax and the commonwealth’s sales and use tax are different and, accordingly, Sterling Act preemption does not apply.”

Despite the Supreme Court’s major blow to the beverage industry, the fight against the city’s beverage tax is not over yet. There is a bill in the Pennsylvania house that would preempt the beverage tax and stop any other Pennsylvania city from imposing the same tax. Unfortunately the bill does not seem to have the kind of support the beverage industry is hoping for. Danny Grace, secretary-treasurer for Teamsters Local 830, recently stated, “unless proposed state legislation that would preempt municipalities from enacting their own taxes gains some traction in Harrisburg, this is the grim new reality we must accept.”

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Update on Joint Employer Legislation and NLRB Rulemaking

by Amanda Doran Dempsey

Last November, H.R. 3441, the Save Local Business Act, passed in the House of Representatives and was sent to the Senate for consideration and vote. H.R. 3441 amends the National Labor Relations Act (NLRA) and the Fair Labor Standards Act (FLSA). The law also rolls back the NLRB decision in Browning-Ferris Industries of California, Inc., et al. The bill is awaiting action from the Senate.

While action in Congress has stalled, the National Labor and Relations Board continues to grapple with the implications of its decision in the Browning-Ferris case, which modified the standard for determining a joint-employer. In 2015, the NLRB’s decision in Browning-Ferris Industries, held that an entity may be a joint-employer of another entity’s employees if it has reserved the right to control essential employment terms of the other entity’s employees. In December 2017, the NLRB overruled the Browning-Ferris Industries decision with the Hy-Brand Industrial Contractors decision, reverting to the former joint-employer standard, whereby an entity could only be considered a joint-employer if it actually exercised significant controls over another entity’s employees. However, the reversal was short lived. On February 26, 2018, the NLRB vacated its decision in Hy-Brand. The NLRB reinstated the Browning-Ferris standard after the NLRB Inspector General concluded that a board member, William Emanuel, had an ethics conflict. Mr. Emanuel’s former law firm had represented an adversely affected client in the Browning-Ferris case.

In addition to the NLRB vacating Hy-Brand, Browning-Ferris requested that the D.C. Circuit reinstate its appeal in early 2018. The court responded and added the case to its docket on April 6. In early June 2018, the NLRB decided it would not reconsider its decision to vacate Hy‑Brand.

As of June 8, 2018, Browning-Ferris remains the standard for what defines a joint-employer relationship. Under this standard, companies are ‘joint employers’ if they have indirect or contractually reserved control over workers, instead of the direct and immediate control standard that used to define the term in labor law.

Proposed rulemaking

On May 9, 2018, the NLRB issued a press release regarding the use of notice-and-comment rulemaking for the joint-employer standard. The NLRB Chairman, John F. Ring, stated that the “notice-and-comment rulemaking offers the best vehicle to fully consider all views on what the standard ought to be,” and that the NLRB had “begun the internal process necessary to consider rulemaking on the joint-employer standard.” The NLRB revised its statement in a June 5, 2018 letter to Senators Warren, Sanders, and Gillibrand. No longer just a consideration, the NLRB is now preparing the internal process necessary for an official Notice of Proposed Rulemaking on joint employment for this summer.

We will continue to monitor the progress regarding the joint-employer standard. If you have questions about how this may affect you or your business, please contact us.

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Plan Ahead for New Jersey’s Equal Pay Act, Effective July 1, 2018

New Jersey has enacted the strongest equal pay legislation in the country, the Diane B. Allen Equal Pay Act (“Allen Act”). The Allen Act expands New Jersey’s equal pay protections not only based on gender, but for all protected classes, and goes into effect on July 1, 2018.

Equal Pay for Substantially Similar Work Is Required

The Allen Act prohibits employers from paying members of a protected class[1] “at a rate of compensation, including benefits, which is less than the rate paid by the employer to employees who are not member of the protected class for substantially similar work.” “Substantially similar” work is determined based on a “composite of skill, effort and responsibility.”

Employers may not reduce an employee’s rate of pay to comply with this requirement. Nor may employers take into consideration the employee’s geographic location when determining compensation rates, as the Allen Act requires that the comparison of wage rates be “based on the wage rates at all of the employers’ operations or facilities.”

There Are Limited Exceptions

Limited exceptions may be used to justify a different rate of compensation. The exceptions include if the differential is made pursuant to a seniority or merit system, or if the employer can demonstrate that bona fide factors other than the characteristics of the protected class account for the entire wage differential, such as education, training, experience, or the quantity or quality of production, among other requirements[2].

Damages and Limitations Period

Damages available to employees include an award of three times the amount of any monetary damages suffered by the employee. Liability will accrue each time an employee receives a paycheck that is subject to an illegal wage differential. Employees may be able to obtain backpay for up to six years for continuous violations.

No Retaliation or Waivers

Employers are prohibited from retaliating against employees and prospective employees for, among other things, requesting, discussing or disclosing to another employee or former employee, an attorney from whom the employee seeks legal advice or a government agency, information regarding the job title, occupational category and rate of compensation of the employer’s employees or former employees, or the race, gender, ethnicity, military stats or national origin of the employees or former employees.

Employees may not be required to sign a waiver of this as a condition of employment or otherwise be required to agree not to make or respond to such requests. Nor may employees sign waivers agreeing to shorten the statute of limitations or waive any of their rights under the New Jersey Law Against Discrimination.

Reporting Requirements for Contractors

Employers who contract with the State of New Jersey or any agency or instrumentality of the State, regardless of the employer’s location, will be subject to reporting requirements. If the contract is for the provision of qualifying services[3], the required data includes compensation and hours in the form of pay bands for each establishment of the employer. If the contract is to perform any public work, similar information must be provided through certified payroll records.

Plan Now for July 1, 2018

Below are some things employers should think about doing in advance of the Allen Act’s July 1, 2018 effective date:

  • Conduct a compensation audit, with the assistance of counsel, to determine whether adjustments to compensation and/or job descriptions need to be made.
  • Train human resources personnel, managers and recruiters on the Allen Act.
  • Review and amend your employee polices to notify employees of the Allen Act’s protections and ensure your policies comply with the Allen Act’s requirements.
  • Identify your contracts with New Jersey public bodies that will be subject to the Allen Act’s reporting requirements and make sure there is a system in place to gather the data that must be provided.

For more information on the Allen Act, please contact the Kent Franchise Law Group attorney with whom you regularly work.

This News Alert has been prepared for informational purposes only and should not be construed as, and does not constitute, legal advice on any specific matter. For more information, see the disclaimer.

[1] Protected class member status includes “race, creed, color, national origin, nationality, ancestry, age, marital status, civil union status, domestic partnership status, affectional or sexual orientation, genetic information, pregnancy, sex, gender identity or expression, disability or atypical hereditary cellular or blood trait of any individual, or liability for service in the armed forces.”

[2] To take advantage of the “bona fide factors” exception, employers must also show that:  (a) the bona fide factors do not perpetuate and are not based on a compensation differential founded on any characteristic of members of a protected class;  (b) each factor  is reasonably applied; (c) one or more of the factors account for the whole wage differential; and (d) the factors are job-related with respect to the position and based on a legitimate business necessity. If it is demonstrated that there are alternative business practices that would serve the same business purpose without producing the wage differential, a factor based on business necessity does not apply.

[3] “Qualifying services” are the “provision of any service to the State or any other public body except for public work.” See N.J. Rev. Stat. C.34:11-56.26 for the definition of “public work.”


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Wisconsin Senate Bill 422 addresses joint employment

On March 2, 2016, Governor Scott Walker(R), of Wisconsin, signed Wisconsin Senate Bill 422 into law. This law is important to franchisors because, under this new law, franchisors are not considered employers of their franchisees or their franchisees’ employees for purposes of state employment laws relating to worker’s compensation, unemployment insurance, employment discrimination, minimum wage, and wage payments, unless the following applies:

  1. The franchisor has agreed in writing to assume that role.
  2. The franchisor has been found to have exercised a type or degree of control over the franchisee or the franchisee’s employees that is not customarily exercised by a franchisor for the purpose of protecting the franchisor’s trademarks and brand.

As of now this law is only applicable in Wisconsin. However, it is good news for franchisors. It is in direct contrast to recent publications by several federal agencies ( e.g., NLRB) which have tried to make it easier for franchisors to be considered joint employers with their franchisees. Hopefully, other states will follow suit and pass similar state laws.

As always, we will keep up to date on any developments in this area and keep you informed.

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