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NLRB's New Ruling: What You Need to Know Posted by Jordan Wilson | 9.25.15 11:35am

Franchises across the nation are talking about the National Labor Relations Board’s (NLRB) decision to expand the definition of “joint employer;” a ruling that could make for some unsettling liability laws in the future. How could it affect your business model? Read on to find out.

A Look at the “Joint Employer” Law Then & Now

During the Reagan administration, the NLRB strictly defined a “joint employer” by the degree of control the parent company had over its divisions. Unless you had direct control over conditions such as hours, operations, and working environment, you could not be held liable as the parent company.

The new ruling, however, applies a significantly looser definition. Now, any franchise or contractual relationship (depending on the industry) is enough to show your influence over working conditions. In short, you no longer have to demonstrate direct control over operations in order to be held liable as a parent company.

If this sounds vague to you, it’s because it is. By nature, laws, are left a certain amount of breathing room; unfortunately, this particular language has left franchisors with the difficult task of adjusting to new operating procedures with their franchisees to keep them from exposing themselves to liabilities.

What It Means For You

If you’re a franchisor who’s having a hard time finding your place amidst all of these rulings, you’re not alone. In fact, you’re in the very same situation that many other franchisors have found themselves. How do you proceed with your role when you’re now restricted in what you can and cannot tell your franchisees in terms of operations? How do you do your job without being considered liable for the franchisee’s business?

These are questions that will undoubtedly be answered over time. Until then, we’re left with similar thoughts to those expressed by Iain Murray of Competitive Enterprise Institute, whose opinion on the recent decision was stated as, “[it] turns the clock back 30 years on American employment practices, which have seen massive growth in flexible, more autonomous business and employment arrangements such as franchises, contract work, suppliers, and so on.”