In March, a district court judge struck down the National Labor Relations Board’s (NLRB) new joint employer rule, and NLRB chose to appeal the decision. On July 19, 2024, the NLRB voluntarily dismissed the case.
The NLRB’s admission of defeat is a significant victory for small business owners, especially for the franchisors and franchisees who were unfairly targeted by the NRLB’s joint employer rule.
The new rule changed the standard for determining whether two businesses are “joint employers” under the National Labor Relations Act (NLRA). It would have forced more businesses to collectively bargain with union representatives, increased business liability for unfair labor practices, and would have subjected more businesses to union picketing during labor disputes.
Unlike the previous joint employer rule, which asserted that a business was a joint employer of another company’s employees only if it exercised “substantial direct and immediate control” over essential terms of their employment, the new rule provided that only indirect use or even just possession of such authority was sufficient. It also added new terms and conditions of employment that could serve as evidence of a joint employer relationship and refused to exempt small businesses from the rule.
Franchises in particular faced ruinous consequences if the new rule had remained in effect. A franchise consists of a larger company (a franchisor), which allows a smaller company (a franchisee) to use its brand and trademark, typically with the franchisor providing direction and assistance to ensure protection of its brand and the franchisee’s success. The new rule, unlike the previous rule, refused to say whether such brand protection would create a joint employer relationship. In the face of such uncertainty, franchisors would have had little choice but to either stop providing support to franchisees, or else downgrade franchisees—who are small business owners—to mere employees.
NFIB stood against changing the joint employer standard from the very beginning, filing comments against NLRB’s recission of the previous rule and its proposal of the new rule, and NFIB opposed the final version of the rule. NFIB also announced a key vote for legislation against the new rule, and as a result, the House of Representatives passed H.J.Res. 98, disapproving the rule.
The NLRB’s dismissal of its appeal means small businesses have greater protection from joint employer status. This is a win for small businesses everywhere, especially franchises. NFIB will continue to stand against bureaucratic overreach, and in support of clear standards that allow small businesses to thrive.
