Q&A with Frank Zaid.
Article originally published on September 5, 2017 in the Canadian Business Franchise Magazine.
Q: How will the recommendations in the final report from the special advisors to Ontario’s Changing Workplaces Review affect franchising in the province?
A: The final report, which was released on May 23, 2017, recommends a process that would force enhanced collective bargaining rights for employees of franchisees of the same franchisor, but rejects the concept of a ‘joint employer’ in franchise systems, pointing out a new legislative test in this regard would be controversial and unclear in its application. More pertinent, however, is the new bill introduced by Ontario’s government in response to the report.
Cause for concern
Back in February 2015, when the review was initiated, its stated objectives were to (a) consider issues affecting workplaces and (b) assess how Ontario’s current labour and employment law framework addresses current trends and issues, with a special focus on the Labour Relations Act and Employment Standards Act.
An interim report released in July 2016 caused enormous concern in the franchising community over the possibility the final report would recommend making franchisors and their franchisees ‘joint employers’ of the franchisees’ employees. Such a recommendation could result, for example, in employees of multiple franchise units being considered to have a single employer in the franchisor, allowing for single union certification and bargaining on behalf of those employees. As mentioned, however, the final report rejected this concept, instead suggesting the issue should continue to be considered on a factual basis by using established legal principles, rather than creating a new one.
Addressing collective bargaining
The final report states “structural weakness in the current legislation” has resulted in employees of franchisees not having the opportunity to bargain collectively in a meaningful way. To address this issue, the report recommends the following requirements:
- Bargaining units of different franchisees of the same franchisor, with the same union in the same geographic area, would be required to bargain together centrally.
- An ‘employer bargaining agency,’ made up of representatives of the franchisees as employers, would represent the franchisees at the bargaining table with the union.
- Unless the franchisor were also an employer within the affected geographic area, it would not have a seat at the bargaining table.
- The Ontario Labour Relations Board (OLRB) would be given the authority to require the formation of an employer bargaining agency and set its terms,
- The franchisees’ obligation to bargain centrally would remain so long as the union held bargaining rights.
- Multiple locations owned by the same franchisee could be consolidated as a single bargaining unit by the OLRB in appropriate circumstances. That franchisee would also participate in central bargaining.
- Any strike or ratification vote would involve all bargaining units, not individual bargaining units.
- The OLRB would have the authority, if requested by an involved party, to direct the terms of a collective agreement between a franchisee and a union to be extended to apply, with or without modifications, to a newly certified bargaining unit involving the same union and a different franchisee within the same franchise system.
There are also other, more general recommendations in the final report that would affect franchise operations, such as the elimination of a current lower minimum wage for restaurant servers and a direction for government agencies to exercise more attention in addressing the apparent misclassification of franchise employees as independent contractors. (This type of reclassification has occurred with increasing frequency in the past few years among some franchise systems, particularly in the commercial cleaning industry. It is a key distinction, as the report rejects the notion that independent contractors should be entitled to the benefits or protections of employment legislation, as they are not economically dependent on one employer and are conducting their businesses on their own account.)
The report also recommends an enforcement process under which any employer with multiple sites would be required to investigate wide-scale violations in the workplace. For franchising, this could mean a franchisor would be responsible for ensuring its franchisees are complying with employment standards legislation. The report points out such top-down compliance strategies are not based on concepts of joint liability, but instead suggest the top industry players (i.e. the franchisors) have a stake in protecting the reputation of their brands.
The government’s reaction
Ontario’s government reacted very quickly to the final report by introducing Bill 148, the Fair Workplaces, Better Jobs Act, on June 1, 2017. The bill contains specific provisions in response to certain recommendations in the report. At press time, a public consultation process was being undertaken.
Notably, the bill does not include provisions to adopt any of the report’s recommendations that were specifically directed at franchise systems. It does not, for example, require multiple franchisees of the same brand operating within the same geographic area to bargain together centrally with local employees towards one collective agreement, nor for an employer bargaining agency to represent franchisees at the table with the union.
The bill does propose changes to labour legislation in general that may increase union activities and successful applications for union certification for both franchisors and franchisees. The OLRB will be able to change the structure of bargaining units with a single employer, thus making it easier for employees of such an employer operating multiple businesses to be certified as one unit. This change could affect (a) multi-unit franchisees and (b) franchisors with multiple corporate stores in close geographic proximity to each other.
Trade unions in the building services, home care, community services and temporary help agency industries can now apply for certification without a representation vote. (The term ‘building services industry’ is broadly defined in the bill and includes such categories as cleaning, food and security services, all of which are frequently franchised.) The OLRB will have the discretion to certify a union if it is satisfied more than 55 per cent of the employees in the bargaining unit are members of that union. The OLRB will also have discretion to dismiss applications for certification without a representation vote if it finds, upon application by an ‘interested person,’ there is evidence such an application does not likely reflect the true wishes of the employees.
If no trade union has been certified as a bargaining agent and no collective agreement is in place, a union may apply to the OLRB for an order requiring an employer to provide a list of its employees. If the order is obtained, the trade union can then use the list in a campaign to establish bargaining rights.
Changes for all
Bill 148 contains a number of other labour and employment changes that will affect franchised businesses, including new shift scheduling rules, equal pay for equal part-time work provisions and, the most highly publicized, an increase in the provincial minimum wage.
The current minimum wage in Ontario is $11.40 per hour. With phased increases, it will rise to $14 on January 1, 2018, and $15 on January 1, 2019.
Equal pay will be mandated for part-time workers doing the same job as full-time workers. An employer will be required to pay an employee three hours of wages if the employer cancels a shift with less than 48 hours’ notice.
All employees will be given 10 personal emergency leave (PEL) days per year, with a minimum of two of those days paid, and the 50-employee threshold for PEL requirements has been removed. Also, after five years of working for the same employer, an employee’s minimum vacation entitlement will increase from two to three weeks per year.
Other proposals by Ontario’s government that will have an effect on franchises and other businesses include the following:
- Card check certification for the building services, home care and community services industries.
- Allowing unions to access employee lists and certain contact information, provided they can demonstrate they have already achieved the support of 20 per cent of the employees who are involved.
- Allowing the OLRB to change the structure of bargaining units within a single employer, where the existing units are no longer appropriate for collective bargaining.
- Allowing the OLRB to consolidate newly certified bargaining units with other existing units under a single employer, where those units are represented by the same bargaining agent.
- Eliminating certain conditions for remedial union certification, allowing unions to more easily become certified when an employer engages in misconduct that contravenes the Labour Relations Act.
- Making access to first contract arbitration easier and adding an intensive mediation component to the process.
- Increasing maximum fines under the Labour Relations Act from $2,000 to $5,000 for individuals and from $25,000 to $100,000 for organizations.
Good news for franchising
The provisions of Bill 148 should be viewed as good news for franchising and for most franchisors and franchisees. The Ontario government has not singled out franchising for any special treatment as was recommended in the Changing Workplaces Review’s final report.