The Texas Labor Code has been amended to provide that a franchisor is not considered an employer for claims related to employment discrimination, wage payment, the Texas Minimum Wage Act, and the Texas Workers’ Compensation Act, among other laws. According to S.B. 652, this is so unless the franchisor has been found by a state court of competent jurisdiction to have exercised a type or degree of control over its franchisee or its franchisee’s employees not customarily exercised by a franchisor for the purpose of protecting the franchisor’s trademarks and brand. The amendment goes into effect on September 1, 2015.

The bill was introduced by state Senator Charles Schwertner, reportedly because of franchisors’ concerns that recent National Labor Relations Board actions targeted franchisors for franchisees’ labor law violations. The NLRB’s General Counsel has issued unfair labor practice complaints alleging that certain franchisors are “joint employers” with their franchisees who allegedly have violated employees’ rights. This opened franchisors to lawsuits for the actions of franchisees, critics asserted. Current NLRB decisions treat two companies as joint employers only if both exercise a significant degree of direct control over the same employees. Direct control requires that a putative joint-employer have control over terms and conditions of employment of the subject employees. This includes hiring and firing, setting work hours, determining compensation and benefits, and exercising day-to-day supervision.

Senator Schwertner commented that the NLRB actions “called the common understanding of a franchisor-franchisee relationship into question….” That common understanding is that a franchisee is responsible for all employment decisions regarding employees of the franchisee and the franchisor has no interaction with or authority over the franchisee’s employees.

Despite the new law’s protection for franchisors in Texas, it is uncertain how the exception – in this case the type of control exerted by a franchisor that is not customarily exercised to protect a franchisor’s trademark and brand – will be interpreted. And, although the NLRB General Counsel’s actions may have been the catalyst for the new Texas law, because of the strong pre-emptive reach of the NLRA, it is unlikely that the law will impact NLRB decision-making about joint employment.    That decision-making is likely to be based on a different analysis than at present in the not-too-distant future. In a brief filed with the Board in connection with a case involving Browning-Ferris Industries (Case 32-RC-109684), the NLRB’s General Counsel has urged the Board to abandon the current “direct control” joint-employer standard and replace it with a “totality of the circumstances” test – one based on whether an alleged joint-employer exercises either direct or indirect control over the subject employees who work for another employer, and even to consider whether the alleged joint-employer has “unexercised potential to control working conditions” of those employees.

Jackson Lewis attorneys are available to answer inquiries regarding this and other developments.

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Photo of Kristin L. Bauer Kristin L. Bauer

Kristin Bauer is a Principal in the Dallas, Texas, office of Jackson Lewis P.C. and is a contributor to the Disability, Leave & Health Management Blog.  In addition to handling an active employment litigation docket, she provides advice and counsel to employers on the numerous laws touching ill and injured workers, including the ADA, the FMLA, and related state laws, and strategies to manage those risks.

Learn more about Ms. Bauer on the Jackson Lewis website.

Photo of Howard M. Bloom Howard M. Bloom

Howard M. Bloom is a Principal in the Boston, Massachusetts, office of Jackson Lewis P.C. He has practiced labor and employment law representing exclusively employers for more than 36 years.

Mr. Bloom counsels clients in a variety of industries on labor law issues. He trains and advises executives, managers and supervisors on union awareness and positive employee relations, and assists employers in connection with union card-signing efforts, traditional union representation and corporate campaigns, and union decertification campaigns. He also represents clients at the National Labor Relations Board in connection with bargaining unit issues, objections and challenges, as well as unfair labor practice investigations and trials. Mr. Bloom also has been the spokesperson at countless first and successor contract collective bargaining negotiations, and regularly advises on collective bargaining agreement administration issues, including grievance/arbitration issues.

Mr. Bloom has appeared before the Massachusetts Supreme Judicial Court, the U.S. Court of Appeals for the District of Columbia, several U.S. District Courts, the National Labor Relations Board, the Massachusetts Labor Relations Commission, the Equal Employment Opportunity Commission and the Massachusetts Commission Against Discrimination.

Mr. Bloom speaks frequently to employer groups on a wide range of labor and employment law topics. He also has written extensively on labor and employment law for a variety of publications, including New England Business magazine, The Boston Globe and the Boston Business Journal. He also is editor of and a frequent contributor to the Jackson Lewis Labor & Collective Bargaining Blog.

While attending law school, he was the Executive Editor of The Advocate: the Suffolk University Law School Journal and President of the Student Bar Association.

Mr. Bloom is a diehard baseball fan. His first book, The Baseball Uncyclopedia: A Highly Opinionated Myth-Busting Guide to the Great American Game, was published in February 2006.

Photo of Philip B. Rosen Philip B. Rosen

Philip B. Rosen is a Principal in the New York City office of Jackson Lewis P.C. and a member of the Firm’s Management Committee. Mr. Rosen also leads the firm’s Labor Practice Group. He joined the Firm in 1979 and served as Managing Partner of the New York City office from 1989 to 2009.

Mr. Rosen lectures extensively, conducts management training, and advises clients with respect to legislative and regulatory initiatives, corporate strategies, business ethics, social media, reorganizations and reductions-in-force, purchase/sale transactions, sexual harassment and other workplace conduct rules, compliance with the Americans With Disabilities Act, wrongful discharge and other workplace litigation, corporate campaigns and union organizing matters, collective bargaining, arbitration and National Labor Relations Board proceedings. He has been quoted by the press on many labor matters, including the National Labor Relations Board’s recent initiatives on protected concerted activity and the proposed Notice Posting requirements.