As predicted, National Labor Relations Board (NLRB) has appeal THE Eastern District of Texas' in power overturning the expanded Common Employer Rule. Especially in light of President Biden The veto of May 3 of a bipartisan resolution that would have killed the expanded rule (and curbed the NLRB's ability to make drastic rule changes in the future), that's not good news. But exclusiveness-overwhelming the extended version of the rule is not yet in place, and International Franchise Association continues to oppose it.
“The courts made it clear that the Common Employer Rule exceeds the scope of the NLRB's authority and should not stand,” says Michael Layman, IFA's senior vice president of government affairs. “IFA will not stop fighting to protect franchised businesses from the harm that NLRB overreach will bring, so franchising can continue to be one of the greatest avenues for business ownership and job creation .”
“Historical Victory”
Besides legislative pressure leading to the now-vetoed bipartisan resolution, an IFA-led coalition including American Chamber of Commerce, filed a lawsuit in 2023 challenging the legality of the expanded rule in the Eastern District of Texas. A federal judge ruled in favor of the IFA in March and hit below the expanded rule in what IFA President and CEO Matthew Haller called “historic win for the franchise.”
NLRB Appeal
The NLRB has now appealed the decision of the Eastern District of Texas. This means that, although the extended rule is not yet in effect, it will take another look, this time from a 5th US Circuit Court of Appeals. That court could reverse the Eastern District's decision and reinstate the expanded rule or affirm the decision.
Meanwhile, in Washington, DC, Service Employees International Union (SEIU) is also challenging the rule in court, arguing that it is too narrow. The same coalition from the Texas case, led by IFA, intervened in the DC lawsuit, and the court is currently considering a motion to dismiss.
Protect your business
According to Alex MacDonald, an attorney at the labor relations firm Littler Mendelson, franchisors can do a few simple things today to start protecting and preparing their businesses for a revived Common Employer Rule. Speaking during the IFA webinar on April 23, MacDonald said, “Joint Employer: Are Exclusive Companies Clear?“
First, MacDonald recommended a full review of everyone CONTRACTS (with vendors, franchisees, etc.) for indirect or reserved control specifications, such as:
- Direct training requirements
- The right to fire workers
- Background control Requests
- Minimum qualifications
- Specific staffing and coverage level requirements
Business owners can counter these risks by clearly assigning responsibility for as many essential terms and conditions as possible to the employer.
Next, review your business agreements: Emphasize brand standards over individual employee standards when you need service requirements in contracts or in home reporting and inspections. Minimize your involvement in recruiting, time keeping, record keeping, payroll policies and other operations.
If a franchisor must inspect a location, MacDonald again recommended focusing on brand standards, not individual worker standards. “You want to be careful about things like cleanliness,” he said. “Does the brand tag appear in the right place? Do they clearly communicate that they are exclusive? Are they products equipped? Instead of how many employees are working at the desk and how those employees are doing. These kinds of things can start to look like oversight as opposed to protecting your brand standards.”
Additionally, reduce your reliance on non-core vendors—especially if they must be on-site—and train your supervisors on how to interact with retailers. But above all, MacDonald said, “Choose reliable partners. If you end up contracting a vendor that operates on the borderline, then these rules make it more likely that you will be liable for that vendor's conduct or mistakes.”