Spending bill could give franchises relief from NLRB’s ‘joint employer’ rule


The franchise industry is lobbying Congress to use a must-pass government spending bill to force the NLRB to delay enforcing its new “joint employer” standard for at least 10 months.

In a 3-2 decision in August, the NLRB ruled that companies are joint employers of workers if they share control over the workers’ terms and conditions of employment. It doesn’t matter if a company actually exercises such control — indirect control and potential control are sufficient to be a joint employer, according to the NLRB ruling.

Businesses fear this new definition of “joint employer” will be used to make companies responsible for the employment practices of their subcontractors and franchisees, even if they don’t exercise direct control over them.

The new standard could boost the efforts of labor unions to organize fast-food workers. It also could force frachisors to exercise more control over their franchisees, making owning a franchise a less desirable option for small business owners. Franchise owners previously controlled their own hiring practices, working conditions, wages and hours, according to IFA.

Around 40,000 franchise businesses, with more than 75,000 locations, are at risk of failure because of the higher labor and operating costs that could result from the ruling, concludes a new study by Frandata. The study projects that the equity value of franchise businesses will drop by one-third to one-half.

On a conference call with reporters Monday afternoon, Dave Gronewoller, a Golden Corral franchisee in North Carolina, South Carolina and Florida, said he has pulled back on opening three new locations because of the NLRB’s ruling.

“We just don’t yet if your franchisor is a joint employer, if we will be a franchisee,” Gronewoller said.

Mike Bidwell, CEO of the Dwyer Group, said his Waco, Texas-based franchising company, which offers 11 service-based brands, has dialed back the training it provides to its franchisees because “we’re fearful we’ll be tagged as a joint employer if we provide the type of training we used to provide.”

The spending bill, which must be passed by Friday to avoid a government shutdown, is attracting lots of proposed policy riders, but House members on the press call said the joint employer delay is a top priority.

“We have really been pushing this,” said Rep. Virginia Foxx, R-N.C.

“Small business owners are closely watching,” said Michael Layman, executive director of the Coalition to Save Local Businesses.

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