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Third Party Management Insights

What the NLRB Ruling Means for Third Party Management

Greg Dickinson - CEO, Hiperos By Greg Dickinson - CEO, Hiperos

The National Labor Ruling Board issued an ordinance that broadened the definition of “joint employer” to include subcontractors, franchisees and temporary staffing agencies in certain circumstances. Most commonly, this will include restaurants such as McDonald’s that are owned by franchisees or common ride-sharing services like Uber or Lyft. For these businesses, this ruling has huge implications regarding third-party risk. From the Hiperos perspective, it is important to understand these risks and get a grasp on the programs that should be put in place to help protect franchisers.

By broadening the definition of “joint employer” to include companies that for the most part have a hands-off role in management but have the potential to affect working terms and conditions, it creates an entirely new set of rules for the franchiser/franchisee model to operate under.

Companies need to be aware of these regulations and maintain compliance with them. It opens up the door for principal employers to be at fault for violations by their subcontractors, for instance for poor workplace safety conditions. What this means is that the new ruling dramatically increases the liability placed on the franchisers: If a franchisee’s employees get in trouble, the franchiser can be held responsible.

To avoid the extra liability, companies need to better understand the risks they are taking through their third-party relationships. This will help companies to stay competitive by getting a leg up on exercising more control over third parties to ensure that standards are maintained, which is where third-party compliance and monitoring comes into play.

A number of specific programs will go a long way towards increasing protection for franchisers and helping them better manager third party risk, including:

  • Workplace safety
  • Subcontractor compliance
  • Third party training
  • Insurance compliance
  • Code of conduct
  • Performance management
  • Corporate and social responsibility
  • Reputation risk management

These will go a long way to helping companies control their liability and become proactive in gaining visibility and insight they need to know what their franchisees are doing and limit the downside from their poor behavior.

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