Around the same time the National Labor Relations Board (NLRB) issued its controversial and precedent-shattering decision in Browning-Ferris Industries of California, Inc. d/b/a BFI Newby Island Recyclery, a franchise industry group revealed that the Occupational Safety and Health Administration (OSHA) is also targeting companies with franchising business models.
The International Franchise Association (IFA) leaked to the media an internal memorandum prepared by the U.S. Department of Labor’s Office of the Solicitor (SOL), analyzing whether OSHA may hold both a franchisor and franchisee jointly liable for violations of the Occupational Safety and Health Act of 1970 (OSH Act). The memo outlines questions to ask and materials to request when inspecting a franchisee to determine whether to place joint employer liability for safety violations of the franchisee on the franchise owner. Among other things, the memo instructs investigators to request: the franchise agreement, business documents the franchisee must submit to the franchisor, site selection information, advertising approvals, brand standard policies, and signage and menu requirements. One news source claims that one unnamed area office has already acted on the memorandum and subpoenaed a fast-food franchisee for materials.
OSHA’s draft memorandum exceeds the scope of the Browning-Ferris decision’s “right to control” test and essentially adopts NLRB General Counsel Richard Griffin’s broader “economic and industrial realities” test. More concerning is whether OSHA is expanding the limits of its authority beyond workplace safety. A critical element of a federal agency’s ability to serve valid administrative subpoenas for documents is that the subpoena’s inquiry must be within the scope of the agency’s jurisdiction. However, materials such as advertising approvals and menu requirements bear no relevance to workplace safety and health.
In an August 26, 2015 press release, IFA Vice President of Government Relations, Public Policy & Counsel Elizabeth Taylor accused OSHA of exceeding its authority, claiming that the agency’s policy was initiated at the behest of the Service Employees International Union (SEIU), which is engaged in a three-year long labor campaign against fast food franchises. In response to the memorandum, the IFA served a seven-page Freedom of Information Act request to OSHA, seeking all materials relating to the development of the joint employer draft memorandum and OSHA’s interactions with the SEIU. “The Labor Department is conducting a witch hunt that, at a minimum, exceeds the statutory authority afforded to the OSHA by Congress,” said Taylor in a press release. “At worst it is engaged in a conspiracy to destroy the franchise model in cooperation with the Service Employees International Union and the supposedly-independent unelected bureaucrats at the National Labor Relations Board and its General Counsel.”
OSHA has never held a fast-food franchisor to be a joint employer. The agency currently regulates multi-employer worksites under its Multi-Employer Citation Policy (MEP). The MEP, which was designed to establish liability against construction general contractors, is an ill fit for franchisors. The MEP contemplates that all liable employers are physically present at a multi-employer worksite. Franchisor representatives, on the other hand, typically are not present at their franchisee’s locations on a sufficient basis for OSHA to establish that a franchisor has knowledge of violations at the location.
Another hurdle for OSHA is the language of the OSH Act. If the agency’s joint employer doctrine is held to expand common law, the agency could run afoul of section 4(b)(4) of the OSH Act. That provision prohibits the OSH Act from enlarging or diminishing the common law on employer liability for workplace safety.
OSHA’s proposed joint employer liability also presents a slippery slope that the agency may readily apply to industries beyond fast-food franchises. In the future, the agency may assert that a parent company should be held responsible for a subsidiary’s OSHA violation or hold a company liable for OSHA violations committed by independent contractors working on its behalf.
Despite these challenges, OSHA is not likely to back down from joint employer liability. For the past few years, the agency has pushed the limits of its authority. The agency has advanced novel legal theories of enforcement, such as enterprise-wide relief, the creation of the Severe Violator Enforcement Program (SVEP), and its current and unprecedented attempt to overturn a federal court’s decision via rulemaking. With the IFA aggressively contesting OSHA’s authority, litigation over an expanded joint employer liability standard appears to be imminent.