If it feels like deja vu, it is. In just over two years since it last ruled on this issue in April of 2020, earlier this month on September 6th, the National Labor Relations Board (NLRB) issued another proposed rule change for establishing joint employer status (as regulated under the National Labor Relations Act). This new rule proposal, if enacted, will annul and change the NLRB’s joint employer rule that was promulgated in April 2020. If this new rule is finalized as now written by the NLRB, it will have a deleterious impact upon the franchise industry in particular, as well as being adverse for other industries, too.
The franchise industry is a powerhouse. It creates over 8 million jobs and generates about three-quarters of a trillion dollars in economic output per year. The franchise industry relies on a model where the franchisor is not considered an employer, rather each franchisee owner employs their own employees. The franchise model is what enables so many individuals to own their own successful business, as it is a “cookie cutter” model, allowing and training “novices” to run a business successfully.
The proposed new joint employer rule will consider two or more employers to be joint employers if they “share or codetermine those matters governing employees’ essential terms and conditions of employment, including workplace health and safety.” Franchisors typically provide a formula for success, which includes staffing standards and other guidelines to best replicate their proven business model.
However, franchisors sell franchises to franchisees. They do not employ the franchisee or the franchisee’s employees. It is the franchisee that employs its own employees, not the franchisor. The franchisor simply creates a blueprint for the franchisee’s success Making the franchisor responsible for a franchisee’s employment issues will negatively impact franchises as an economic driving force.
The NLRB is requesting public comments on these proposed changes to their joint employer rule, but comments must be received by November 7, 2022. Comments can be submitted electronically at regulations.gov. If you are in or are considering the franchise industry, do not wait to make your voices heard. This new rule change, if approved, will adversely impact you.
Posted by: Rudy Troisi, L.P.I., President and CEO, Reliable Background Screening
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