The Joint Employer Standard Hurts the Economy

Economic Impact

New, groundbreaking research shows that the expanded joint employer standard has cost franchise businesses $33.3 billion per year, resulted in 376,000 lost job opportunities, and led to 93% more lawsuits.

An Expanded Joint Employer Standard Led to a 93% Increase in Litigation Against Franchise Businesses

Research

69% of Americans say it’s important for policymakers to change the joint employer standard so national brands and franchise owners can better work together.

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73% of Americans believe that the individual who owns and operates a franchise business should have control over managing its employees.

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92% of surveyed franchise businesses say the expanded joint employer standard has led to less support from their brands

Reasons for less support

  • Increased litigation and legal costs
  • Increased costs from outsourcing training
  • Increased difficulty implementing training to address sexual harassment and sensitivity
  • Reduced quality and safety support

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70% of Americans support government policies that promote local ownership of stores and restaurants.
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Myth v. Fact

Addressing the false information regarding the joint employer standard

Myth

Fact #1

Both franchise small businesses and large franchise brands are harmed by the Joint Employer Rule. Businesses of all sizes are now exposed to unlimited and unpredictable joint employer liability. For large businesses, the frequency of joint employer litigation has swelled, and franchise small businesses are facing more operational and legal costs, decreased business values, less compliance assistance from franchisors, less growth and fewer opportunities to create jobs. In fact, joint employer lawsuits have increased by more than 93% from the time of the first major joint employer suit until now.

Fact #2

Joint employer liability comes at a high cost to large and small businesses alike, and these costs are rising. A new economic analysis shows that an expanded joint employer standard has cost franchise businesses $33.3 billion per year, resulted in 376,000 lost job opportunities, and led to 93% more lawsuits.

Fact #3

The standard underwent a major change following a 2015 ruling by the National Labor Relations Board (NLRB). After the Browning-Ferris Industries (BFI) decision, the criteria for joint employer status expanded to include any exercise of indirect, potential, or even reserved control over the practices of another business and its employees. This decision by the NLRB is an unprecedented reinterpretation of what it means to be in a joint employer relationship. Now, this new standard covers nearly all private sector businesses and their employees, and the nebulous “indirect” and “reserved” control doctrines have the potential to impact the operations of all businesses, large and small.

Fact #4

The vague and unlimited language of the new joint employer test ensures that no contractual relationship is safe from a joint employer finding. For three decades, the “direct” and “immediate” control was a test that gave clarity to businesses. Today, any business that has direct, indirect or even reserved yet unexercised control, could run afoul of such unlimited joint employer liability. For franchise brands, this uncertainty and limitless liability makes it more difficult if not impossible to provide the necessary support to their franchisees. In fact, economic research suggests that nearly all franchise brands or franchise owners have seen a decrease in the support offered by brands to businesses.

Fact #5

New polling from Morning Consult shows that 7 out of 10 Americans support government policies that promote local ownership of stores and restaurants. Additionally, 73% of Americans believe that the individual who owns and operates a franchise business should have control over managing his or her employees. It’s no surprise, then, that 69% of Americans say it’s important for policymakers to change the joint employer standard so national brands and franchise owners can better work together. 

Fact #6

In fact, December’s D.C. Circuit Court of Appeals ruling on the Browning-Ferris case increases the need for rulemaking. By remanding the case back to the NLRB, the decision emphasizes the need for clear, concise rulemaking that defines the nature of the business relationships inherent in franchising.

Fact #1

Both franchise small businesses and large franchise brands are harmed by the Joint Employer Rule. Businesses of all sizes are now exposed to unlimited and unpredictable joint employer liability. For large businesses, the frequency of joint employer litigation has swelled, and franchise small businesses are facing more operational and legal costs, decreased business values, less compliance assistance from franchisors, less growth and fewer opportunities to create jobs. In fact, joint employer lawsuits have increased by more than 56% from the time of the first major joint employer suit until now.

Fact #2

Joint employer liability comes at a high cost to large and small businesses alike, and these costs are rising. New economic analysis shows that an expanded joint employer standard costs the U.S. economy $31.2 billion per year and results in about 350,000 fewer job openings. For the [HOLD – INDIVIDUAL FRANCHISEE DATA] The joint employer rule hinders job creation and makes it harder for franchisors and franchisees alike to grow their businesses

Fact #3

The standard underwent a major change following a 2015 ruling by the National Labor Relations Board (NLRB). After the Browning-Ferris Industries (BFI) decision, the criteria for joint employer status expanded to include any exercise of indirect, potential, or even reserved control over the practices of another business and its employees. This decision by the NLRB is an unprecedented reinterpretation of what it means to be in a joint employer relationship. Now, this new standard covers nearly all private sector businesses and their employees, and the nebulous “indirect” and “reserved” control doctrines have the potential to impact the operations of all businesses, large and small.

Fact #4

The vague and unlimited language of the new joint employer test ensures that no contractual relationship is safe from a joint employer finding For three decades, the “direct” and “immediate” control was a test that gave clarity to businesses. Today, any business that has direct, indirect or even reserved yet unexercised control, could run afoul of such unlimited joint employer liability. For franchise brands, this uncertainty and limitless liability makes it more difficult if not impossible to provide the necessary support to their franchisees. In fact, economic research suggests that nearly all franchise brands or franchise owners have seen a decrease in the support offered by brands to businesses.

Fact #5

New polling from Morning Consult shows that 7 out of 10 Americans support government policies that promote local ownership of stores and restaurants. Additionally, 73% of Americans believe that the individual who owns and operates a franchise business should have control over managing his or her employees. It’s no surprise, then, that 69% of Americans say it’s important for policymakers to change the joint employer standard so national brands and franchise owners can better work together.

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