On February 7, 2020, the International Franchise Association (IFA) published an article expressing its strong opposition to the Protecting the Right to Organize (PRO) Act (H.R. 2474), which passed in the U.S. House of Representatives on February 6. The PRO Act proposes to codify the National Labor Relations Board’s (NLRB) joint-employer standard adopted in its highly-controversial Browning-Ferris decision from 2015. It would also adopt certain aspects of the California state court decision of Dynamex Operations West v. Superior Court, which created a so-called “ABC” test for determining whether an individual should be classified as an independent contractor or an employee.
According to the IFA:
“This bill would pose a massive threat to America’s 733,000 franchise businesses and the 7.6 million workers they employ. Already, the joint employer standard that this bill seeks to codify has cost the franchise industry $33.3 billion per year and led to a 93% increase in joint employment litigation. . . . [The PRO Act] could have the detrimental impact of turning every franchise owner into a de-facto employee of the brand.”
The Protecting the Right to Organize (PRO) Act (H.R. 2474)
In its current form, the PRO Act, if enacted, would create a new standard for joint employment that follows the NLRB’s Browning-Ferris decision. In pertinent part, H.R. 2474 states:
“Section 2(2) of the National Labor Relations Act (29 U.S.C. 152(2)) is amended by adding at the end the following: ‘Two or more persons shall be employers with respect to an employee if each such person codetermines or shares control over the employee’s essential terms and conditions of employment. In determining whether such control exists, the Board or a court of competent jurisdiction shall consider as relevant direct control and indirect control over such terms and conditions, reserved authority to control such terms and conditions, and control over such terms and conditions exercised by a person in fact . . . .’”
The issue of joint employment has long been an issue in the franchise industry. Despite the clear legal distinction between a franchisor and its franchisees, the NLRB has consistently sought to apply the joint employer standard to the franchise relationship—meaning that franchisees and franchisors would be considered joint employers of the franchisee’s personnel. This presents a host of potential issues and serves as fertile ground for litigation among all parties involved. In the words of Matt Haller, the IFA’s Senior Vice President of Government Relations & Public Affairs, “This bill is the most anti-franchise bill in modern congressional history. . . . [T]he PRO Act seeks to systematically undo the highly successful franchise business model at the behest of Big Labor unions. It would turn local entrepreneurs into mere employees of their brands.”
Contact Franchise Litigation Attorney Jeffrey M. Goldstein
Our firm will be monitoring H.R. 2474’s progress in the U.S. Senate for further developments. In the meantime, if you have questions about your legal rights as a franchisee and would like to speak with an attorney, you can call 202-293-3947 or contact us online for a free consultation.