What Does the NLRB Rule Repeal Mean for Franchises?


Click here to register for the IFA’s free webinar, “Joint Employer: Are Franchise Companies In the Clear?” on April 23 at 2 p.m. ET.

Last week, the U.S. Senate approved Congressional Review Act Resolution H.J. Res. 98, overturning the National Labor Relations Board’s (NLRB) expansion of the Joint Employer Rule. The International Franchise Association (IFA) had steadfastly opposed the expansion since it was introduced last year.

The Senate’s action follows the House, which passed the legislation in January. It’s now awaiting President Biden’s signature.

Related: Considering franchise ownership? Get started now to find your personalized list of franchises that match your lifestyle, interests and budget.

Rule expansion would have “crushed” franchising

Some form of the Joint Employer Rule has existed for years, but in 2023, the NLRB expanded it in a way that directly impacted the franchise industry. The expanded rule would have crushed franchising by broadening the definition of joint employment, potentially making franchisors liable for employees they don’t directly employ or manage.

For example, under the expanded version of the rule, two companies — say, McDonald’s and a McDonald’s franchisee — could more easily be considered “joint employers” of the same employees. That would make McDonald’s legally liable for any labor violation committed by one of its franchisees, even though McDonald’s itself did not hire and does not manage that employee.

Related: The Rule That Would’ve Crushed Franchising Was Just Struck Down — But the Fight Isn’t Over.

Legal action is a “landmark win”

In addition to legislative pressure, the IFA, U.S. Chamber of Commerce and several other trade organizations filed a lawsuit challenging the legality of the expanded rule in the Eastern District of Texas last year. A federal judge ruled in the IFA’s favor in March and struck down the expanded rule in what IFA president and CEO Matt Haller called a “landmark win for franchising.”

Although these actions mean the expanded rule won’t go into effect, there are still a few key unanswered questions.

Related: The New Joint Employer Rule Will Crush Franchising As We Know It. Here’s What You Can Do to Protect Your Business.

Webinar: Two crucial questions remain

The court decision and legislative approval are both significant triumphs for the franchising sector. However, uncertainties about the implications of these developments still linger for franchise businesses. Looking ahead, two crucial questions remain:

  1. Will the NLRB appeal the court decision, and what should businesses anticipate if it does?
  2. Will President Biden sign or veto the repeal of the expanded rule, and what happens if he vetoes?

The IFA will delve into these questions and more in its upcoming webinar “Joint Employer: Are Franchise Companies In the Clear?” on April 23 at 2 pm ET. The webinar will feature Michael Layman, the IFA’s senior VP of government affairs, and attorneys Jim Paretti and Alex MacDonald of employment and labor relations law firm Littler Mendelson. This webinar will help franchise industry professionals gain a deeper understanding of the court’s decision, the recent legislative actions and what to expect moving forward.

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