Sunday, December 7, 2014

Franchisee vs franchiser-Who is responsible for worker welfare?

The on-going tussle between the employees and owners of franchise operators for better working conditions for the formers, especially hourly wages, can impact on the very existence of the fast food industry in the US. Though the crisis is largely relevant to that country, the outcome may set new conventions and practices that may spread to other countries also. At present large fast food brands strike deals with far flung independent operators called franchisees for making their products and selling the same to the public, getting royalties based on sale volumes. Beyond some perfunctory supervision to ensure the reputation of their brand image, the franchiser does not have too much liability on their hands. Under classical employee-employer obligations, the working conditions including wages are determined by the franchisee with no over sight by the franchiser. Recent agitation by the fast food workers to increase their wages does not seem to be affecting the franchiser to the least. This is being contested by the workers union and the labor authorities are in the process of deciding this issue soon. Here is a ring side view of the tussle in the country and a possible outcome.  

"Thefast-food franchise model is under attack, and the culprit is an under-the-radar legal dispute currently being considered by the National Labor Relations Board. Though the case itself is relatively mundane, the outcome could set a precedent that would make fast-food chains legally responsible for workers who had previously been the liability of their franchisees. Experts say that such a ruling could cost the fast-food industry billions of dollars and alter the power dynamic in a long-running struggle between McDonald's and its workers. The case revolves around whether the court will overturn a 30-year-old legal ruling that says companies can't be held liable for unfair employment practices toward workers that the company is not directly in charge of hiring and firing - including the nearly 8 million American workers employed by franchise businesses ranging from car dealerships to restaurants."

Probably the workers may win this battle as continuous focus on hourly wage rates in the US is due to the political clout the workers' unions across all sectors enjoy in that country. In a country like India this issue may not be very relevant as franchising system is still at an early stage of development. However this issue will become critical once the manufacturing and marketing environment assumes critical size in the coming years. Franchising is in vogue in some sectors like retailing, automobile fuel dispensing, restaurants, warehousing and distribution, automobile sales stores etc.  It is going to take a long time for the workers to achieve critical size vis-a-vis unionizing. Still it is not logical to decide that local franchisees can escape the responsibility to their employees appointed by them based on the "hire and fire" system. With the employee's provident fund system taking deep root in the country, such responsibilities for the welfare of the workers by the local operators cannot be evaded in this country. That does not mean that the big franchisers can be a mute spectator to maltreatment and exploitation of labor when they are working tirelessly to promote their brands locally. Probably government can come up with a legal frame work involving shared responsibilities between the franchisee and franchiser. Worker welfare cannot be left entirely to the franchisee as abrupt termination of franchise arrangement by the franchiser could throw the workers out of employment with no safety net..     


No comments: