Legal Expert Provides an Update on the Status of the Joint Employer Rule

The franchise industry is facing a major challenge in 2023 as the National Labor Relations Board (NLRB) expanded the Joint Employer Rule, potentially holding franchisors liable for employees they don’t directly employ or manage. This rule change has sparked a series of legal challenges, with the International Franchise Association (IFA) leading the charge.

In a recent interview with attorney Jim Paretti of Littler Mendelson, it was revealed that President Biden vetoed a bipartisan resolution to review the rule, effectively closing that avenue of challenge. The IFA coalition initially won a case in the Eastern District of Texas, but the NLRB has appealed the decision to the Fifth Circuit Court of Appeals.

The appeal will be heard by a three-judge panel, with the possibility of a full appeals court rehearing the case. Additionally, a separate case filed by the SEIU in the D.C. appeals court is currently under review for jurisdiction.

The expanded rule poses a significant threat to the franchise industry, with organized labor pushing for a broad joint employer standard. If implemented, franchisors may be forced to exert more control over franchisees, potentially turning independent business owners into glorified middle managers.

Franchisors are advised to carefully review their agreements and practices to ensure they are not inadvertently crossing the line into joint employer status. The outcome of these legal challenges will have far-reaching implications for the franchise industry and the future of franchising as a whole.