On August 11, Wisconsin Attorney General Brad Schimel, along with five other state attorneys general, asked the National Labor Relations Board (NLRB) to drop its effort to redefine the test for determining joint-employer status. The attorneys claimed in their communication that a change would negatively impact businesses and franchises.

Since the early 1990’s the NLRB has followed a standard that treats two companies as joint employers only if both exercise a significant degree of control over the same employees. The NLRB General Counsel believes that the old test is too restrictive and favors a “totality of circumstances” standard, where joint-employer status exists when one company exerts such influence over the working conditions of the other company’s employees that meaningful collective bargaining could not occur without bringing the first company to the table.

The proposed standard, premised on the facts and circumstances in each case, makes the outcome of such determinations less predictable. Under the new standard, more employers could qualify as joint employers, increasing their potential liability for alleged labor law violations or for satisfying bargaining and other obligations. This could negatively impact the business relationship between franchisees and franchisors, as franchisors have always wanted to maintain sufficient control to preserve the goodwill and image of the franchisor’s brand.

The letter notes that the proposed standard would make it more difficult to structure the relationship between franchisee and franchisor and would “compromise one of the core purposes of the National Labor Relations Act — to promote the flow of commerce.”

The letter to the Board can be found here.