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The New Joint Employer Rule Will Crush Franchising As We Know It. Here's What You Can Do to Protect Your Business. Here's how the NLRB's new Joint Employer Rule redefines the franchisor-franchisee relationship and will alter the $825 billion franchising landscape.

By Carl Stoffers

Key Takeaways

  • The new Joint Employer Rule broadens the definition of joint employment, potentially making franchisors liable for employees they don't directly employ or manage.
  • The rule is expected to have several detrimental effects on the franchise system, which contributes more than $825 billion to the U.S. economy.
  • Under the new rule, franchisors might be held accountable for employment decisions made by franchisees, which could lead to increased centralization and oversight by franchisors.
  • The expanded joint employer standard could lead to a significant increase in litigation, as franchisors become legally responsible for a wider range of employment issues.
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Entrepreneur Magazine Editor-in-Chief Jason Feifer spoke on Wednesday with franchise industry experts and leaders regarding the National Labor Relations Board's new Joint Employer Rule, which threatens to upend the $825 billion franchise market. Included in the discussion were Sarah Bush, General Counsel at the International Franchise Association (IFA), Matthew Haller, President of the IFA, and David Humphrey, IFA Chair and Planet Fitness franchisee.

Related: To stop the National Labor Relations Board (NLRB)'s action you can write to your representatives in Congress through our link. Just click here and we have already drafted a letter to send.

The NLRB's new Joint Employer Rule makes franchisors jointly responsible for the labor practices of their franchisees, whereas previously the franchisees were responsible for compliance with labor laws related to their employees. This threatens the very nature of the $825 billion franchise system and will lead to increased legal costs and franchisor oversight. The main issues discussed in the webinar were:

  • The National Labor Relations Board's new rule expands the definition of a joint employer. Previously, a franchisor could be considered a joint employer only if they exercised direct and immediate control over a franchisee's employees. The new rule broadens this definition, potentially making franchisors liable for employees they don't directly employ or manage.
  • This change disrupts the traditional franchise model. Currently, franchisees operate with autonomy, managing their hiring, firing, and wage-setting practices. Under the new rule, franchisors might be held accountable for employment decisions made by franchisees, which could lead to increased centralization and oversight by franchisors.

Related: To learn more about the NLRB's act, please visit SaveLocalBusinesses.com.

  • The expanded joint employer standard could lead to a significant increase in litigation. Franchisors will become legally responsible for a wider range of employment issues.
  • Negative economic impacts are predicted. This will include potential losses in franchise business activity and job opportunities, increased costs due to compliance and litigation, and barriers to entry for new franchisees.
  • Efforts are being made to challenge and overturn the rule. The International Franchise Association (IFA) is advocating for congressional action through the Congressional Review Act and has also filed a lawsuit challenging the rule. These efforts aim to preserve the traditional franchise model and mitigate the rule's negative impacts.
  • Do your part to save your business! Franchisees, franchisors, and industry stakeholders are encouraged to engage with lawmakers and participate in advocacy efforts. The IFA emphasizes the importance of the franchise community's involvement in influencing policy and legal outcomes to protect the franchising model.

Learn more: This New Government Rule Threatens to Disrupt the $825 Billion U.S. Franchise System

Carl Stoffers

Entrepreneur Staff

Senior Business Editor

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