NLRB Releases Final Joint Employer Rule – More Good News for the Franchise Industry

Mar 01, 2020

On February 25, 2020, the National Labor Relations Board (NLRB) released its final joint employer rule that favorably defines joint employer conditions, so that entities such as franchisees and their franchisor will generally not be considered to be joint employers going forward. This NLRB ruling follows the Department of Labor similarly issuing its final joint employer rule in January.

The NLRB rule states: "Under this final rule, an entity may be considered a joint employer of a separate employer's employees only if the two share or codetermine the employees' essential terms and conditions of employment, which are exclusively defined as wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction."

Further, in its 194-page ruling, the NLRB specifically states that the Board "has generally not held franchisors to be joint employers with their franchisees."

These two rulings together truly are fantastic news for the franchise industry. They allow franchisors to protect their brands by detailing specific operational guidelines. For example, specifics can be addressed in the franchise agreement, noting items such as operational procedures, and also details such as requiring "best practices" background checks (and defining what "best practices" means), etc.

It is suggested that the franchise agreement also clearly state that no joint employer situation exists, and that employment decisions are made solely by the franchisee. Franchisees simply implement consistent criminal background checks, based upon "best practices" hiring policies that the franchisor has instituted system-wide to protect the franchise network, and everyone's investment in the franchise brand.

Of course, always seek advice of your counsel when preparing your franchise agreement and other franchise documents to ensure compliance with all state and federal regulations.  This National Labor Relations Board Final Joint Employer Rule becomes effective on April 27, 2020.

Posted by: Rudy Troisi, L.P.I., President and CEO, Reliable Background Screening

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