In the wake of fluctuations in federal labor law, in particular, as interpreted by the National Labor Relations Board (“NLRB”), regarding who may be considered a joint or co-employer of an employee, in 2017, Arizona enacted its own joint employer law. A.R.S. § 23-1604 makes clear that, at least under Arizona law, a franchisor is not a joint or co-employer of a franchisee or any employee of a franchisee absent a clear, written agreement between the two employers to the contrary. Similarly under this new law, an owner of a mark (e.g., trademark, service mark) is not a joint or co-employer of a licensee or employee of a licensee absent an agreement in writing to the contrary.
The law was signed by Arizona Governor Doug Ducey (a former CEO for a large franchise company) in response to the NLRB’s 2015 decision in Browning-Ferris Industries of California , which substantially broadened the scenarios under which two or more employers could be deemed joint employers, and thereby make franchisors accountable for employment decisions and other actions of their franchisees, licensees, and the like. As readers of our blog will recall from our prior post, in December 2017, the new Republican-majority NLRB issued its decision in Hy-Brand Industrial Contractors, in which it did away with the Browning-Ferris joint employer standard and essentially returned to the standard that was applied prior to Browning-Ferris, which requires that in order for a franchisor to be deemed a joint employer with a franchisee, the franchisor must exercise direct and immediate control over the franchisee, its operations, or its employees. This narrower standard is a fact-based inquiry that requires a case-specific analysis, and thus is not as straightforward as Arizona’s law, which makes the issue simply one of an express contractual agreement to be joint employers. However, the NLRB’s what’s-old-is-new-again standard and Arizona law are certainly now more consistent, post Browning-Ferris. This somewhat lessens the likelihood that the Arizona law would be found by a court to be inconsistent with, and thus, preempted by, federal law, although, for all practical purposes, in any case involving a federal claim, application of the Arizona law may well be preempted by the joint employer standards applied by federal courts and agencies to federal claims.