Potential Consequences of the NLRB Joint Employer Rule

The International Franchise Association (IFA) released new research from Oxford Economics showing franchisees’ concerns with the National Labor Relations Board’s (NLRB) forthcoming joint employer standard. The survey shows that the rule is expected to increase uncertainty among franchisees, increase costs for franchisees, their franchisors and consumers, and decrease access to business ownership through franchising, which provides a pathway to ownership for women and people of color at disproportionately greater rates. The specific findings in the report include:

• 74% of franchisees expressed a high level of concern at the prospect of increased franchisor control, and 55% a high level of concern with reduced franchisor support.
• 43% of franchisees expected some change in the franchisor/franchisee relationship. 22% of respondents expected franchisors to increase control over their operations, whereas 21% expected franchisors to distance and reduce operations and compliance support, and 38% did not know what to expect.
• 66% of franchisee respondents expected the new standard to raise barriers to entry into franchising with underrepresented groups potentially being hit disproportionately, especially women and minorities.
• 70% of franchisees expected increased litigation and the costs associated with it, as consistent with the results of the 2015 standard.
• Franchisees anticipate additional costs including increases in legal and advisory fees as franchisees and franchisors navigate compliance under the new rule, in addition to greater insurance and operational costs.

The NLRB released its proposed rulemaking on joint employment in September 2022. IFA and thousands of franchisee members commented on the proposal in December cautioning that the proposal could “wreak havoc on the franchise business model.” Today’s survey echoes those concerns.

The survey was conducted by IFA and FRANdata, in conjunction with Oxford Economics, throughout July and August 2023, receiving responses from franchisees across business lines throughout the United States.