NLRB Expands Joint Employer Standard for Franchise Operations

The National Labor Relations Board's new joint employer standard took effect, significantly expanding when companies can be considered joint employers of contract and franchise workers. Under the new standard, a company may be deemed a joint employer if it has the authority to control essential terms and conditions of employment — even if it does not exercise that control.

The rule is particularly significant for franchise systems, staffing agencies, and companies that use subcontractors. If a franchisor is deemed a joint employer of franchisee employees, it could be required to bargain with unions, be liable for labor law violations, and face organizing campaigns across the entire franchise system.

A federal court in Texas vacated the rule in March 2024, finding the NLRB exceeded its statutory authority. The Board has indicated it will appeal. The litigation creates uncertainty about the applicable standard.