NLRB Upends Joint Employer Standard for Franchise Business Owners

The National Labor Relations Board on Thursday altered the joint employer standard, dramatically changing the way franchises do business and opening them up to further liability. 

“The NLRB today satisfied the politically motivated requests of organized labor and manufactured a new joint employer standard that small businesses have long been bracing for," said IFA President and CEO Steve Caldeira. "In doing so, the board ignored decades of judicial precedent and bipartisan policy agreement dating back to the Johnson Administration to invent new labor law. The Browning-Ferris decision is proof that the NLRB may target parties to any business contract in pursuit of their ideological agenda of promoting unions above all else. The ruling jeopardizes small employers in numerous sectors and the future viability of the franchise model of doing business."

“The board’s tortured analysis will undoubtedly be met with skepticism and will be rejected by local franchise owners, legislators and, ultimately, the courts,” Caldeira added. “IFA and its allies are asking Congress to intervene to halt these out-of-control, unelected Washington bureaucrats to preserve the established joint employer standard relied upon by America’s 780,000 franchise businesses and the 8.5 million jobs they directly create.”

According to long established practice and law, local franchise owners control their own hiring practices, working conditions, wages, and hours of operations and file their own taxes. None of these decisions are controlled by the brand company, IFA said. Each local franchise business owner operates a separate company independent of the brand company. It is clear that franchise employees are completely independent of the brand company, IFA argued. 

Under the new ruling, the NLRB would consider a whole multitude of factors – completely unrelated to employees’ condition of employment – as indicative of joint employment. Prior to today, to be deemed a joint employer, two or more companies must have exercised direct operational and supervisory control over an employee. Under this new interpretation, the NLRB is expanding that and applying a broader “economic realities” test to include “indirect control” or even “potential, unexercised control," IFA pointed out. 

These changes to the joint employer standard could impose new collective bargaining obligations and allow unions the ability to strike or picket a large entity compared to the location where there is a dispute. The new standard would also increase the likelihood of union “campaigns” against national businesses, while forcing small businesses to become engaged in protracted, unnecessary and costly legal battles, IFA said.