NLRB Drops Expanded Joint Employer Appeal

The proposed expanded joint employer rule, which an International Franchise Association (IFA)-led coalition challenged in federal court, was defeated Friday when The National Labor Relations Board dropped its appeal of an earlier ruling in favor of the coalition.

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“This announcement means that the latest attempt to implement joint employer is finally finished and represents a landmark victory for franchise small businesses in communities across America,” Matt Haller, IFA president and CEO, said in a statement. “The franchise business model is the best vehicle for American workers to generate upward mobility and create small business ownership from all walks of life. Make no mistake: while today’s news means the current threat is behind us, IFA will remain vigilant against any attempts to target the franchise model or our members.”

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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. Under the proposed 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.

Although this is the end of this attempt to expand the rule, attorney Jim Paretti of labor relations law firm Littler Mendelson recently told Entrepreneur what the NLRB’s options are moving forward. “The short answer is that the board can keep trying to write a rule,” Paretti said. “They can go back to the drawing board, try again and write something more narrow.”

Read More: Bloomberg Law