Joint Employer Rule Threatening Franchising Struck Down

For months, the franchise industry has been on edge — involved {that a} new federal rule may undercut the very mannequin of franchising. Now, some are respiration a tentative sigh of reduction. On Friday night, a federal choose in Texas struck down the rule. “It is a landmark victory for franchising,” the International Franchise Association (IFA) mentioned in a press release to its members.

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The Joint Employer Rule

The federal rule is named “Joint Employer.” Some type of the rule has existed for years, however in 2023, the National Labor Relations Board expanded it in a manner that straight impacted franchising. Below the brand new model of the rule, two firms — say, a McDonald’s and a McDonald’s franchisee — may extra simply be thought of “joint employers” of the identical workers.

That will, for instance, make McDonald’s legally answerable for any labor violation dedicated by certainly one of its franchisees, although McDonald’s itself didn’t rent and doesn’t handle that worker, and due to this fact may complicate the connection between franchisees and franchisors.

Associated: This New Rule Will Crush Franchising As We Know It

‘Essentially upend’ franchising

The expanded rule would “basically upend the franchise enterprise mannequin,” the IFA said at the time. “The rule would cut back the independence of franchise enterprise homeowners, diminish franchisees’ fairness of their companies, and power franchisors to supply much less help.” The expanded rule would additionally make it simpler for workers to unionize.

The IFA was certainly one of many organizations — together with the U.S. Chamber of Commerce, the American Hotel and Lodging Association and the National Retail Federation — to sue to dam the rule in November.

The rule’s implementation had been pushed again because the litigation continued. Though the rule will now now not go into impact, the difficulty will not be absolutely resolved. The Nationwide Labor Relations Board can attraction the ruling, though it has not but mentioned if it is going to. The NLRB may additionally revise the joint employer rule.

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Congressional decision

A extra lasting decision could come via Congress. In January, the Home passed a resolution to reject the NLRB’s joint employer rule. Advocates at the moment are urging the Senate to cross the measure and ship it to President Biden to signal. Based on the IFA, this “would tie the arms of future NLRBs from instituting expansive joint employer requirements and supply long-term certainty to franchising.”