The legal standard for determining when an entity may be considered a “joint employer” of another entity’s employees has been in a state of flux since the National Labor Relations Board’s (NLRB) Browning-Ferris ruling in 2015. While the NLRB reversed the Browning-Ferris decision late last year, the uncertainty over the past few years left a host of lingering questions, particularly in the world of franchising.
To address these questions, the NLRB has been working on a set of regulations to help clarify when the joint employer standard should be applied. It recently released a first draft of its proposed regulations.
The Joint Employer Standard in Franchising
The proposed regulations start by defining what constitutes a “joint employer” (a definition that is notably absent from the current regulatory framework). As proposed:
“[A]n employer may be considered a joint employer of a separate employer’s employees only if the two employers share or codetermine the employees’ essential terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction . . . [and] a putative joint employer must possess and actually exercise substantial direct and immediate control over the employees’ essential terms and conditions of employment in a manner that is not limited and routine.”
However, with regard to franchising, the NLRB has taken the position that, “[f]ranchisors generally exercise some operational control over their franchisees, which renders the relationship subject to application of the [NLRB’s] joint-employer standard.”
Additionally, as noted in a recent article on BlueMauMau.org discussing the draft rulemaking, the NLRB has previously, “made it clear that ‘the essential element’ in a joint-employer analysis is whether a putative joint employer’s control over employment matters is [‘]direct and immediate,’ again citing cases. But in years past, evidence of indirect control was typically insufficient to establish joint-employer status where such supervision was ‘limited and routine.’”
What Does This Mean for Franchisees?
So, what does all of this mean for franchisees? At this point, we are still awaiting further guidance from the NLRB, potentially in the form of a comprehensive and clearly-drafted set of regulations. The International Franchise Association (IFA) has long advocated for clear separation between franchisor and franchisee when it comes to franchisees’ employees; and, according to BlueMauMau.org, the IFA is actively involved in current rulemaking process.
For now, franchisees and dealers who have concerns about the NLRB’s joint employer standard should do their best to avoid issues with the potential to trigger litigation. Even if the NLRB finalizes new regulations soon, it is not yet clear what effect these regulations will have on any outstanding (or subsequently-filed) disputes. At the Goldstein Law Firm, we are actively monitoring the NLRB’s rulemaking process regarding the joint employer standard, and if you have questions or concerns we encourage you to contact us for a confidential consultation.
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The Goldstein Law Firm is a national franchise law firm that exclusively represents franchisees and dealers. Attorney Jeffrey M. Goldstein is an industry veteran with more than 30 years’ experience in franchise negotiations, litigation and alternative dispute resolution. To discuss your franchise or dealership in a free and confidential consultation, please call 202-293-3947 or request an appointment online today.