Unionizing Franchise Locations Could Become Easier Under Proposed Changes to Ontario Law

Written by on May 24, 2017.

The Ontario Changing Workplaces Review has now issued its Final Report, and there’s good news and bad news for franchisors.

First, the good news: as we outlined in February, there were concerns that the Final Report would call for expanding the situations where franchisors would be considered the employers of a franchisee’s employees under Ontario’s Employment Standards Act, 2000 (the “ESA”). However, the panel has chosen not to recommend any substantive changes to the “related employer” provisions of either the ESA or the Labour Relations Act, 1995 (the “LRA”) that would specifically affect franchisor/franchisee relationships.

However, the Final Report proposes significant modifications to how franchises will collectively bargain in the event they are unionized. While this may seem innocuous at first, it could have significant ramifications for franchisors.

Normally, the Ontario Labour Relations Board (the “Board”) will treat franchise locations as independent employers; each must be separately organized by unions and, if successful, each location must then independently negotiate a collective agreement between the franchisee (as the employer) and the unionized employees. This has made it difficult for unions to gain traction in the franchise sector; as the Final Report notes, the unionization rate in Ontario’s private sector is below 7% in workplaces with fewer than 20 employees due to the fact that “[o]rganizing and bargaining individual contracts in thousands of small locations is inefficient, expensive and impractical”.

Therefore, in order to make it easier for individual franchise locations to unionize, the Final Report suggests that a system be put in place where franchisees of the same brand/franchisor could be made subject to one, centrally-bargained “master” collective agreement. That central agreement could be negotiated by the union and an “employer bargaining agency” (as often happens in the construction and hospital sector). Alternatively, the Board could take a model agreement (i.e. the first agreement negotiated with a specific franchisee) and then apply it, perhaps with modifications, to franchise locations that are subsequently unionized.

If these proposed changes are passed into law, we expect that trade unions will quickly look to unionize specific franchise locations in order to grab a foothold from which to build a broader presence across the franchise. Accordingly, franchisors will want to ensure that their franchisees are aware of their rights and obligations under the LRA in the event that they become aware of a unionization drive in their workplace.

Siskinds’ Labour & Employment group is continuing to review the Final Report and will provide updates on developments as they occur. For more information on the Final Report’s overall changes to the ESA and the LRA, please see Mary Lou Brady and Beth Traynor’s blogs here and here, respectively.

Posted in Franchising, Labour & Employment