The National Labor Relations Board (NLRB) recently issued a Notice of Proposed Rulemaking on Joint-Employer Standard, which addresses the standard for determining joint-employer status under the National Labor Relations Act, and it's caused quite a stir in the restaurant industry.
According to the NLRB:
"Under the proposed rule, two or more employers would be considered joint employers if they 'share or codetermine those matters governing employees’ essential terms and conditions of employment,' such as wages, benefits and other compensation, work and scheduling, hiring and discharge, discipline, workplace health and safety, supervision, assignment, and work rules. The Board proposes to consider both direct evidence of control and evidence of reserved and/or indirect control over these essential terms and conditions of employment when analyzing joint-employer status."
The problem with this proposed rule is how it could affect franchise and franchisee relationships--possibly ending the current model.
The deadline for submitting comments to the NLRB was Wednesday, Dec. 7, and many across the restaurant industry made their voices heard.
The National Restaurant Association (NRA) was one of the many organizations and companies that submitted comments to the NLRB against the proposed rule change. In a press release, the NRA called the new proposed rule change "vague" and said it would place "undue burdens" on operators trying to understand it.
“The Proposed Rule is of particular concern to the franchise sector of the foodservice industry because it fails to provide meaningful guidance to confidently determine if a franchisor’s necessary exercise of control to protect its brand and trademarks would trigger joint employer status,” said Jordan Heiliczer, director of Labor and Workforce Policy at the National Restaurant Association. “If the Board does not reject the Proposed Rule, at a minimum it should make expressly clear that the Proposed Rule does not apply to franchise agreements or other provisions relating to legitimate business reasons such as brand control and product quality.”
The U.S. Small Business Administration Office of Advocacy also weighed in on the proposed rule with its concerns, echoing the NRA and calling the rule "ambiguous" and "broad." In its comments, the SBA specifically referenced franchises as well, "This proposal may significantly affect franchisor and franchisee relationships. Franchise agreements often contain many terms and conditions with reserved control over the business operations of a brand, such as provisions regarding management, operations, and human resources."
The SBA also raised concerns about the costs and burdens of compliance that would result from this rule change:
"Small businesses commented that franchisors may pull back involvement with their franchisees to indemnify themselves from liability. Franchisors may also provide less legal and human resources advice, which will result in hiring outside professionals to provide guidance, documents, and compliance training. Franchisees reported that this proposal may add costs of thousands of dollars a year and may require hiring a dedicated staffer. A restaurant franchisee owner stated that these costs will prohibit small business expansion, as restaurants are currently facing increased food prices and labor shortages."
The International Franchise Association (IFA) also condemned the proposed rule, with over 3,000 franchises joining them to back the statement that the rule would “wreak havoc on the franchise business model.”
“With this proposal, a conflict-riddled NLRB has told thousands of American small business owners: you’re canceled,” said Michael Layman, senior vice president of government relations and public affairs for the International Franchise Association, in a press release.
In its comments to the NLRB, the IFA said:
"The intent of the proposed rule appears to be to put franchisors in the position of choosing between (1) taking away from franchisees the support they thought they would receive by joining a franchise system; or (2) taking away the independence of franchisees and making them effectively managers of corporate stores, rather than independent business owners."
Plan to Attend or Participate in the Vibe Conference, Feb. 27 – March 1, 2023
To learn more about the latest trends, issues and hot topics, and to experience and taste the best products within the on-premise beverage community, plan to attend the Vibe Conference, Feb. 27 to March 1, 2023 at the Sheraton San Diego Hotel & Marina. Visit VibeConference.com.
To book your sponsorship or exhibit space at the Vibe Conference, contact:
Fadi Alsayegh Sales & Sponsorships Email: [email protected] Phone: 917-258-5174
Donna Bruns Sales & Sponsorships Email: [email protected] Phone: 936-522-6932
Charlie Forman Sales & Sponsorships Email: [email protected] Phone: 845-262-1041
Connect and follow Questex’s Vibe Conference and community at Facebook and LinkedIn.