Franchising Industry Feels Like It Has a Government Target On Its Back As It Continues To Fight Joint Employer Regulations

The franchising industry isn’t something to be overlooked—it employs more than nine million people and contributes more than $1 trillion to the American economy every year. But as a CNBC article points out, the franchising industry now has a government target on its back.

The National Labor Relations Board (NLRB) introduced a new joint employer law that will change the way local franchisees across the country hire employees, set wages, manage their staff and run their daily operations. The new ruling says a franchisor and franchisee can share the ability to govern workers’ terms and conditions of employment. In the past, those decisions were left up to franchisees.

The NLRB is making these changes because it now considers companies with indirect and unexercised control, like franchises, to be joint employers instead of limiting it to companies with direct control over employment conditions.

• The new ruling stems from a decision involving the waste management company Browning-Ferris out of California.
• The NLRB says the new ruling is meant to ensure companies in all industries are held responsible for labor violations committed by their contractors.

The NLRB says the new ruling is meant to ensure companies in all industries are held responsible for labor violations committed by their contractors. But franchise chains across the country, including major brands like McDonald’s , say the law undermines the franchise business model that’s been operating successfully for decades. The industry is committed to fighting the new regulations.

Michael Layman, vice president of regulatory affairs for the International Franchise Association (IFA), said, “The NLRB ruling is a nebulous standard that allows them to target any business contractual relationship they want. It doesn’t just affect the franchising industry. It affects how car manufacturers and car dealerships across the country oversee their workforces, too.”

Aziz Hashim, IFA chairman and NRD Capital managing partner, said, “It is an attack by bureaucrats and union bosses that can stunt job growth and do damage in the economy. Franchising contributes $1.5 trillion annually to the U.S. economy and is the largest vocational system in America. We train people to do jobs and pay them at the same time. It’s a gateway to entrepreneurial opportunity. Why stymie its growth?”