WHAT IS THE JOINT-EMPLOYER RULE?
Joint-employer rule refers to the criteria established by the National Labor Relations Board (NLRB) to determine when two or more entities, like a direct employer and a labor temp agency, share responsibility for the terms and conditions of employment for a particular group of workers, forming a joint employment scenario.
WHY IS THIS RULE SIGNIFICANT?
This rule is significant because it delineates the legal obligations and liability management of different entities involved in a business relationship, such as franchisors and franchisees under the banner of joint employer liability.
HOW IS THE RULE INTERPRETED?
Great question! The essence of the joint-employer rule has been a point of contention for the past 10 years, spanning three separate presidential administrations, each influencing the composition of the NLRB board. As one may surmise, the two political parties (and now independent elected officials) have starkly different takes on this issue. As of today, there’s no official joint employer standard, as it’s caught in a limbo with Congress (in fact, as of this publication, the NLRB link to the Joint Employer Rule is not active).
The interpretation and application of the joint-employer rule have extensive implications for employment relationships, impacting aspects such as wages, working conditions, benefits, and legal rights, thus forming a critical chapter in the narrative of the franchise business model.
VARIOUS TESTS USED TO DETERMINE JOINT-EMPLOYER STATUS
Different tests have been used by courts and the NLRB over the years to assess joint-employer relationships, such as the common law control test, the economic realities test, and the direct and indirect control test, which are often referred to as joint employer tests.
THESE TESTS OFTEN CONSIDERED FACTORS SUCH AS:
- Control over the joint hiring and firing decisions;
- Supervision;
- Setting wages and work schedules;
- Providing benefits; and
- Permanency of the joint relationship.
Recent years have seen an uptick in attention and debate surrounding the joint-employer rule at the Federal level, with discussions often diving into the dol joint employer rule and joint employment flsa considerations. However, note that this is an evolving issue in the law, and is far from settled.
SEVERAL IMPORTANT LEGAL DECISIONS HAVE SHAPED THE JOINT-EMPLOYER RULE AND THE FRANCHISE MODEL:
Browning-Ferris Industries of California, Inc. v. National Labor Relations Board (2015): This landmark case ushered in notable changes in joint-employer standards in the United States. The NLRB revised its standard for determining joint-employer status, easing the path for entities to be considered joint employers. This case spotlighted a waste-management company, Browning-Ferris Industries, and a staffing agency, Leadpoint Business Services. The NLRB ruled that Browning-Ferris could be considered a joint employer of Leadpoint’s employees, despite lacking direct control over them. This verdict broadened the definition of joint employment (the California joint-employer test), potentially affecting more companies and their responsibility for workers’ rights and labor disputes.
McDonald’s USA, LLC v. National Labor Relations Board (2019): In the McDonald’s franchise case, the National Labor Relations Board (NLRB) held that the franchisor, McDonald’s, could be considered a joint employer alongside its franchisees, thereby widening the scope of joint employer liability. The case sprouted from a series of unfair labor practice charges against McDonald’s franchisees, and the NLRB posited that McDonald’s exerted significant control over franchisees’ employment policies and working conditions, embodying the joint employer nlrb stance, which carries implications for the franchise industry and business model.
Dunkin’ Donuts Franchisee Control Case (2021): In February 2021, a federal judge in New Jersey ruled in favor of Dunkin’ Donuts franchisees in a case alleging that the franchisor exerted excessive control over the franchisees, morphing them into joint-employers. The ruling emphasized the importance of independent decision-making by franchisees to steer clear of mass joint employer liability.
Check out this earlier post of ours for more information on the joint employment test and other related topics.
CURRENT LEGAL LANDSCAPE AND REGULATORY UPDATES
After the 2016 U.S. presidential election, the NLRB aimed to revert Browning-Ferris. Initially, it issued a 2017 decision (Hy-Brand Industrial Contractors, Ltd., and Brandt Construction Co.), which overturned Browning-Ferris and reinstated the board’s prior precedent that an employer would only be deemed a joint employer if it exercised direct control over employment terms and conditions.
The NLRB Ruling (2020): Known as the “Joint-Employer Rule,” it revised the standard for determining joint-employer status under the National Labor Relations Act (NLRA). The rule makes it more challenging for a franchisor to be considered a joint employer with its franchisees, requiring direct control over essential terms and conditions of employment.
In 2022, the new Democratic majority at NLRB proposed to rescind and replace the 2020 rule, leading to a whirlpool of discussions around what is a joint employer.
In 2021, the NLRB’s Democratic majority proposed expanding the rule, including factors that can trigger a joint-employer finding beyond merely one business exerting direct and immediate control over another company’s employees. The new test also would consider indirect and unexercised control, echoing the sentiments of joint employer definition. In July, 2023, the NLRB announced that it would issue its decision in August. That did not happen.
Instead, a bi-partisan group of senators (Joe Manchin (D-W.Va), Angus King (I-Maine), Susan Collins (R-Maine), James Lankford (R-Okla), Mike Braun (R-Ind.) and Kyrsten Sinema (I-Ariz.)) have raised concerns over the NLRB’s direction, often touching upon employer liability management. “The six of us are already working together in a coalition to raise this concern,” she said. “Bureaucrats love red tape, that’s what they do. These are individuals who never owned a business, they probably don’t know franchise owners.” – Sen Sinema https://news.bloomberglaw.com/daily-labor-report/sinema-pushes-back-on-labor-boards-planned-joint-employer-rule
The NLRB has now paused.
Stay tuned for more updates on this legal saga and the joint employer rule.
CONSULT WITH LEGAL PROFESSIONALS
The legal landscape surrounding joint-employer standards can vary by jurisdiction and is subject to ongoing debate, legislation, and court interpretations, often intertwining with joint liabilities considerations.
Most franchisors and franchisees are in need of legal guidance to protect themselves in this ever-changing world. Consulting with legal professionals, like Kilcommons Law, can ensure compliance with relevant laws and regulations with properly drafted franchise agreements and franchise disclosure documents.
Reach out to Kilcommons Law today. We are here for all of your franchise needs, ready to navigate the complexities of joint employer rule and dual employment scenarios.