/>iFranchisors have long grappled with evolving and inconsistent standards for determining when a joint-employer relationship exists such that a franchisor can be liable for labor and employment law claims even when it does not exercise direct control over its franchisees.
In particular, in September 2022, California passed the FAST Act, which imposed joint employer liability on both franchisees and franchisors. A year later, that FAST Act was repealed following an unprecedented deal between labor groups and the fast food industry. That deal imposes a sectoral minimum wage for certain fast food workers of $20/hr starting April 1, 2024, and creates an unelected “Council” to recommend employment regulations and workplace standards in the fast food industry, but scraps the proposed joint employer liability rule from the original FAST Act.
The NLRB has stepped in to fill that void, issuing a new rule that (i) broadens the standard for determining joint employer status under the NLRA and (ii) potentially increases the ability of employees to unionize. The new rule considers entities joint employers if the two “share or codetermine” essential employment terms and conditions, rather than only when the entity has direct and immediate control over the same. The “terms and conditions” now overlap with many of the core subjects of collective bargaining, requiring more parties to participate and bargain with unions for CBAs. The NLRB plans to implement the new rule in February 2024.
Time will tell whether the NLRB has better luck than California did in its quest to expand employer status. That said, restaurants should review their current agreements and relationships with other entities to determine if joint employment is on the table.
