The “joint employer” standard has been a hot topic in the franchising world for nearly a decade. This standard is used to determine when multiple entities can be considered employers of a single employee, with the primary purpose of establishing the employee’s right to pursue remedies for discrimination, harassment, workplace injuries, and other forms of harm. Franchise attorney Jeffrey M. Goldstein has written about this topic in the past—first when the National Labor Relations Board (NLRB) issued the Browning-Ferris decision that expanded the federal definition of “joint employer” in 2015, and more recently when the House introduced the failed Protecting the Right to Organize (PRO) Act in 2020.
The Save Local Business Act Would Codify a More Franchise-Friendly Definition of “Joint Employer”
Now, the House is considering a new bill that would make the current joint employer standard federal law. Since issuing the Browning-Ferris decision in 2015, the NLRB has shifted its stance on the joint employer standard several times. As the International Franchise Association (IFA) explains in a recent article discussing the new bill:
“The Save Local Business Act, sponsored by Rep. James Comer (R-KY), would lock in the current, narrower joint employer definition that requires ‘direct and immediate control’ over essential terms of employment. This would replace the shifting regulatory standards that have bounced back and forth for more than a decade, depending on which party controls the National Labor Relations Board (NLRB).”
The Browning-Ferris decision was a big deal in the franchising world because its broad joint employer definition had the potential to expose franchisors to liability for claims filed by franchisees’ employees. The proposed PRO Act sought to codify the Browning-Ferris joint employer standard, and, at the time, the IFA called it “the most anti-franchise bill in modern congressional history.” As noted in the quote from the IFA above, the proposed Save Local Business Act is very different, and it seeks to codify a standard that makes much more sense for both franchisors and franchisees.
The current joint employer standard—the one that the proposed Save Local Business Act seeks to codify—is in place because of a court decision issued in 2024. While the NLRB shifted back to a broader definition of joint employer in 2023 (which the IFA notes faced “immediate backlash” from businesses at large), a federal court in Texas struck down this definition last year. At the time, the IFA called the court’s decision “a landmark victory for franchising,” and since then, the IFA and other advocacy organizations have been pushing for Congress to adopt a similar definition that adequately serves the interests of the franchise industry.
The Save Local Business Act seeks to do just that.
The Save Local Business Act is a one-page bill that does nothing more than add a narrow definition of joint employer to the National Labor Relations Act (NLRA) and the Fair Labor Standards Act (FLSA). If the Save Local Business Act is enacted, the NLRA will define “joint employer” as follows:
“An employer may be considered a joint employer of the employees of another employer only if each employer directly, actually, and immediately, exercises significant control over the essential terms and conditions of employment of the employees of the other employer, such as hiring such employees, discharging such employees, determining the rate of pay and benefits of such employees, supervising such employees on a day-to-day basis, assigning such employees a work schedule, position, or task, or disciplining such employees.”
The FLSA would then adopt the NLRA’s joint employer definition. This definition is substantially narrower than the one established in the NLRB’s Browning-Ferris decision and, more recently in 2023, and it takes essentially the opposite approach of the “indirect control” standard proposed by the failed PRO Act.
Notably, the Save Local Business Act is intended, at least in part, to directly address the IFA’s and other franchise industry advocates’ concerns. In a press release announcing the bill, the office of U.S. Representative James Comer (R-Ky.), the bill’s sponsor, quotes the IFA’s Chief Advocacy Officer as stating that the bill, “provides much-needed stability to the franchise community on the issue of joint employer,” and, “[w]e are grateful to Rep. Comer for his leadership and look forward to clarifying the joint employer standard once and for all.”
Will the Save Local Business Act Become Law?
Of course, all of this leaves us with one fundamental question: Will the Save Local Business Act become law?
At this point, it is too early to tell. With Republicans controlling the House and the Senate, the Save Local Business Act seemingly has an easier road to passage than the PRO Act, which was introduced in a year when control of Congress was split between the major parties. It has been referred to the House’s Education and Workforce Committee, but there hasn’t been any movement on the bill since then. You can track the bill’s progress here.
If the Save Local Business Act is passed, codifying a franchise-friendly joint employer definition would provide significantly more certainty and stability than the NLRB’s shifting definitions over the past decade. But, for now, we will have to take a wait-and-see approach.
Unless and until the Save Local Business Act becomes law, franchisees will have to continue contending with the NLRB’s shifting approach. With the NLRB’s 2023 definition being struck down last year, the current standard is the one adopted by the NLRB in 2020. This standard requires “substantial direct and immediate control” over more or more essential terms or conditions of employment. If you are a franchisee and you have questions about the federal joint employer standard, we invite you to contact us for more information.
Request a Free and Confidential Consultation with National Franchise Attorney Jeffrey M. Goldstein
Franchise attorney Jeffrey M. Goldstein has decades of experience advising and representing current and prospective franchisees. If you have questions or concerns about how the federal joint employer standard impacts your franchise, call 202-293-3947 or contact us online to request a free and confidential consultation.
