In 2024, a federal court struck down the National Labor Relations Board’s broader 2023 joint-employer rule. The NLRB then withdrew its appeal. The Board has since formally removed the 2023 rule and restored the earlier regulatory language.
For franchisors, the narrower 2020 standard remains in effect. It determines when you may qualify as a joint employer under the National Labor Relations Act. But that does not make every form of control risk-free. The important distinction is between protecting your franchise system and controlling the franchisee’s employees.
Why does that distinction matter? A joint-employer finding can require you to bargain with a union representing those workers. You may also be legally responsible for certain unfair labor practices involving them.
What control can you continue to exercise?
Under the 2020 standard, routine parts of an arm’s-length business relationship do not, by themselves, make you a joint employer. In this type of relationship, each business operates independently. The rule instead focuses on whether you have and use substantial direct and immediate control over essential terms and conditions of employment.
This distinction allows you to establish requirements designed to protect your trademarks, products, services and other elements of your franchise system. Requiring employees to wear approved uniforms, for example, differs from determining their schedules or directing their day-to-day work. Brand standards and employment decisions, however, should remain distinct.
When can control raise joint-employer concerns?
The analysis changes when your involvement reaches the franchisee’s workforce. Under the current standard, essential terms and conditions of employment include:
- Wages and benefits
- Hours of work
- Hiring and firing
- Discipline
- Employee supervision and direction
Your level of involvement in these matters is important. Direct control may support a finding that you share control over the employees’ working conditions.
Do your agreements and practices preserve the distinction?
Your franchise agreement is only part of the picture. Joint-employer status depends on the facts of each relationship. How you operate in practice also matters.
As you review your franchise system, look at your agreements, operations manuals and field practices. Do they keep a clear line between protecting your brand and managing franchisee employees?
The current standard draws clearer lines than the 2023 rule would have. But those lines still matter. The key question is whether the authority you keep, and the control you actually use, stays within them.