A long-held standard for determining the “joint-employer” status of franchisors and franchisees is under attack.
The National Labor Relations Board is moving to undercut the standard that has been the bedrock of the franchisor/franchisee model for the last three decades, in support of labor unions and their worker-center allies who are using this issue as part of a large effort to bolster union membership.
The National Restaurant Association supports maintaining the long-established Joint-Employer Standard that has enabled a climate of business growth and investment over the past 30 years.
A controversial National Labor Relations Board decision in August 2015 held that two companies could be considered Joint Employers through indirect and potential control of employees. The split 3-2 decision reverses nearly 30 years of labor law, which held that an employer needed to have actual or direct control over employees.
The previous Standard protected businesses from liability for employees over whom they have no actual or direct control. In adopting the new indirect-control Standard, the NLRB makes employers potentially liable for employees they do not employ.
The NLRB’s initial Joint Employer decisions focused on franchised businesses. Under the Standard that’s been in place for three decades, franchisors and franchisees are two separate businesses. The new Standard makes franchisors potentially liable for employment and workforce actions of franchisees. This robs franchisees of their independence and threatens to permanently and fundamentally disrupt the franchise model.
Recent NLRB decisions have gone beyond the franchise model to apply to all employers, regardless of whether they are franchised. The new Standard appears to encompass a virtually unlimited number of contractual relationships between businesses. All businesses may be held liable for the employment and labor actions of third-party vendors, suppliers, staffing firms or subcontractors over whom they have no direct control.
National Restaurant Association position
We support legislation to restore established labor policy that two or more employers must have “actual, direct, and immediate” control over employees to be considered joint employers. In the previous Congress, we supported the Protecting Local Business Opportunity Act (previously H.R. 3459/S. 2015), which would restore established labor policy that two or more employers must have “actual, direct, and immediate” control over employees to be considered joint employers.
We oppose the NLRB's new joint employer standard:
Disregards three decades of settled law.
Creates a new and expansive Standard under which two business entities can be considered a Joint Employer if one entity had “indirect control” over another entity’s employees. This makes employers potentially liable for employees they do not employ.
Creates a new “reserved authority” theory that allows Joint Employer status even when control over another entity’s employees is not present.