The NLRB recently issued a ruling that expands the potential liability of franchisors and others in employment lawsuits. Essentially, the decisions allow for companies (other than the direct employer) to be deemed an employer. For example, subcontractors could potentially be deemed the employees of the company for whom they work—and the company that subcontracts work to their direct employer.
Recently, congressional leaders of the House and Senate labor committees have proposed legislation to limit the definition of an employer to only those that have “direct and immediate” control over employees.
The practical implication of the expanded definition is that franchisors and others will be targets of employment lawsuits. For example, in wrongful termination, wage, and other employment lawsuits, a franchisor could be sued—in addition to the direct employer. There can be substantial exposure for a company that subcontracts work to a company that, for example, violates wage laws. An expanded definition is likely to force companies to be more concerned about the employment practices of their contractors.