OPERATIONS

National Labor Relations Board ‘Joint Employer’ Stipulation Could Change Franchisor Model

BY Helen Palladeno

The National Labor Relations Board (NLRB) is questioning whether to use a broader definition of the term “joint employer,” a move that could bring sweeping changes to the restaurant and retail/wholesale franchisor model. Whether a large fast-food company exhibited more control than it should have over its franchisees was the most recent catalyst for the proposed change, but several earlier cases have challenged the more than 30-year-old standard for determining joint employment.

If the new definition, which was proposed by the NLRB’s General Counsel Richard Griffin, is adopted, franchisors could see significantly expanded wage and hour and other employment practices liabilities, as well as operational challenges. Franchisors could now be responsible for alleged discrimination, harassment, wage, labor practices, and other allegations that previously may have been directed at franchisees only. Franchisees, in turn, could see a reduction in control or end up out of business altogether.

Key Labor/Employer Protection Implications
Employers that have non-traditional employment arrangements exemplified by the use of franchises and temporary workers have made it increasingly difficult for unions to organize workers who are affected by these arrangements. The NLRB’s general counsel may be seeking a change in the definition of joint employer partly to address this trend.

The potential implication of a joint employer redefinition could impact NLRB representation, unfair labor practice, and secondary boycott proceedings. Expanding the NLRB’s joint employer standard seemingly would make it easier for unions to join multiple employers in labor disputes and organizing campaigns.

The proposed change forces employers to address each of the following conditions of employment under both standards: the broader pre-1984 standard (“indirect or potential control”) and the current, more stringent standard (“direct and immediate”) governing the sufficiency/degree of control. These conditions include:

(1) wages;
(2) employee personnel issues;
(3) the number of employees needed to perform a job or task;
(4) establishing employee work hours, schedules, work week length, and shift hours;
(5) employee grievances, including administration of a collective-bargaining agreement;
(6) authorizing overtime;
(7) safety rules and standards;
(8) production standards;
(9) break and/ or lunch periods;
(10) assignment of work and determination of job duties;
(11) work instructions relating to the means and manner to accomplish a job or task;
(12) training employees or establishing employee training requirements;
(13) vacation and holiday leave and pay policies;
(14) discipline;
(15) discharge;
and (16) hiring.

Wage and Hour and EPL Risk Considerations
Companies in retail/wholesale and food and beverage industries already have one of the greatest risks for wage and hour and employment practices liability (EPL) claims, and the proposed definition for joint employers could tip the scales further. The change could result in franchisors facing broader liability and could also create uncertainty for franchisees and their business relationships.

Franchisors
Just as misclassifying independent contractors has led to a flood of charges from the US Department of Labor (DOL), if the proposed definition impacts liability for misclassification to the extent entities are held as joint employer, it could lead to increased claims against franchisors for discriminatory labor practices and wrongful labeling of their franchisees. Full- and part-time distinctions could be crucial for salary, tax, and other compensation issues under any proposed change in the joint employer definition.

With the proposed change, EPL and wage and hour underwriters could become more rigorous in assessing how much control franchisors exercise over franchisees’ operations. And EPL and wage and hour insurance rates may rise if company losses increase in both frequency and severity related to the proposed joint employer stipulation.

Franchisees
According to the International Franchise Association (IFA), a broadened definition of joint employer would ultimately lead to consolidation among franchisors and force franchisee business owners into a role similar to a store manager or even put them out of business. With franchisors legally responsible, they may no longer want to leave critical business decisions, especially around labor practices, in the hands of franchisees.

Other Material Impact From Proposed Change
Casting a wider employer net is likely to result in more compliance obligations for the franchisor and ultimately greater exposure for noncompliance for unfair labor practice charges under the National Labor Relations Act (NLRA); discriminatory practices under Equal Employment Opportunity (EEO) laws such as Title VII, Age Discrimination in Employment Act (ADEA) and the Americans with Disabilities Act (ADA); and wage and hour violations under the Fair Labor Standards Act (FLSA) and related state laws.

Whether the NLRB’s focus on the issue causes other administrative agencies like the DOL and the Equal Employment Opportunity Commission (EEOC) to take a closer look at the joint employer relationship also bears watching.

To mitigate their risk, franchisors may seek to take over the franchised or subcontracted operations or cease granting more franchises. Either response may weaken and possibly eliminate the franchise business model as it is currently known. Alternatively, some franchisors may find that taking more control is a route to faster growth and higher profitability and potentially better customer experiences.

Preparatory Steps
Though the outcome of the proposed change in the fast-food case may not be known until 2016, or even later if the issue ever reaches the Supreme Court, employers should take steps now to understand how a definition change could impact their individual businesses, their industry, and their insurance coverage.

Steps to take include:

• A thorough review of the employer’s wage and hour and EPL insurance policies.

• An analysis of a firm’s human resource policies to understand what constitutes full-and part-time employment.

• A review of an employer’s benefits, including health plans, 401K, and other retirement plans.

• Consideration of what third-party and vendor relationships franchisors have in place that could be impacted by such a change in joint employer.

• An evaluation of what union organization is in place now and how that could change.



Mac Nadel is U.S. Retail/Wholesale, Food & Beverage Practice Leader, at Marsh USA, a global leader in insurance broking and risk management. He can be reached at [email protected]

Helen Palladeno is Office Managing Shareholder at Ogletree Deakins, a New York City-based leading labor and employment law firm. She can be reached at [email protected].

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Macy’s gets in touch with new omnichannel payment option

BY Dan Berthiaume

Macy’s Inc. is getting in touch with a new omnichannel payment option.

The entire Macy’s retail portfolio, including Macy’s, Bloomingdale’s, Macy’s Backstage and Bloomingdale’s Outlet, is rolling out PayPal as a payment option in-store, online and on mobile by the end of September.

Currently, all Macy’s and Bloomingdale’s customers can use PayPal across all channels. The integration enables Macy’s customers to checkout online or on mobile via the PayPal button. The integration will also enable One Touch, so customers who opt-in can check out online and on mobile without having to type in any payment credentials, usernames or passwords.

In addition, in-store customers can checkout via payment code on the PayPal app, or on the Macy’s app, which enables consumers to scan a QR code on their mobile device to complete a purchase in-store.

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Retail’s $30 billion problem

BY Dan Berthiaume

Organized crime is on the rise — and it’s taking a heavy financial toll on the nation’s retailers.

Retailers on average report they lost $453,940 per $1 billion in annual sales over the past year due to organized crime, according to the National Retail Federation’s 11th annual Organized Retail Crime Survey, which put a $30 billion price tag on the problem.

Additionally, on average retailers allocate approximately $434,032 to specific organized retail crime personnel in their company. The NRF survey are getting more aggressive in their efforts to fight the $30 billion problem

Nearly all (97%) retailers surveyed report that they have been a victim of ORC in the past year, up from 88.2% last year. Los Angeles ranked as the area that retailers said has the most criminal activity, followed by Miami, Chicago, New York and Houston (complete ranking at end of story.)

The survey noted that organized retail crime affects retailers in several ways, and one of the biggest problems happens before the product even reaches the store. Nearly 40% (37.9%) of those polled have experienced cargo theft in the past year, up from 35.4% last year.
In other findings:

•Two-thirds (66.7%) of respondents say they have experienced thieves returning stolen merchandise for store credit, to then sell that merchandise credit to secondary market buyers or sellers.

• Nearly six in 10 (59.1%) of retailers have recovered stolen merchandise from a physical fence location in the past 12 months.

• When criminals aren’t using actual locations to house their stolen goods and run their crime operation, many turn to the internet for the anonymity it offers. Over the past year, 59.7% of retailers surveyed say they have identified or recovered stolen merchandise from an e-fencing operation.

• More companies are investing in tools and resources to combat the growing problem. Overall, 47% of those surveyed say they are allocating additional resources of some kind, up from 41.3% last year.

Specifically, the survey found 31.8% of retailers are allocating additional resources to staffing, up from 22.7% year, and nearly one-quarter (24.2%) are adding additional budget resources.

The top 10 locations that retailers say have the most criminal activity are (by rank):

• Los Angeles
• Miami
• Chicago
• New York
• Houston
• Arlington/Dallas/Ft.Worth
• San Francisco/Oakland
• Baltimore
• Orange County, Calif.

The NRF Organized Retail Crime survey was conducted July 13 – August 6, 2015. Senior loss prevention executives at 67 retail companies completed the survey with the purpose of identifying the depth of organized retail crime throughout the entire industry. This year’s survey features responses from executives representing department/big-box stores, discount, drug, grocery, restaurant and specialty retailers.

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