Seeking a statutory fix for the joint-employer standard

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by Toni-Anne Barry

The relationship between franchisors and franchisees has been strained in recent years by the ongoing battle between what does and what does not constitute a “joint-employer.” Under the discretion of the Obama administration, the NLRB ruled in the decision of the Browning-Ferris Industries labor dispute to move away from the original classification that the employer must be directly involved with the management to be considered a joint-employer. Instead, this precedent had given small business owners stability and predictability for years was expanded to include indirect entities, like franchisors, who do not participate in day-to-day management decisions.

Sharing the role of employer entails making decisions jointly, such as hiring, firing, employee compensation, and all other management functions. This shift is burdensome for both parties. Small business owners want to keep control over their business, and franchisors don’t want to be saddled with the liability that comes with making such decisions. When franchisors who are located hundreds, if not thousands, of miles away are responsible for employees or any issue that occurs on the franchisee property, the franchisees are burdened with higher fees and increased oversight or rules from the brand company.

Current NLRB Chairman John Ring made returning to the original joint-employer definition a priority for the board and in 2017 undid the harmful Obama-era ruling. But the work is not done. The board is in the process of rewriting the joint-employer rule to narrow the definition and provide even more clairty to small business owners as to where the line is between franchisors and franchisees. From September to January, the board opened up the initiative for a comment period so the public could submit their thoughts on creating a rule that would fit the needs of small business owners.

A new NLRB rule is a great start and could be a big win for our hoteliers who rely on this distinction. But as long as the definition of joint employer is left up to the whims of each incoming administration, small business owners will be left without the predictability and clarity they need to run their businesses effectively and with confidence. Franchising is fundamental to the business models of hoteliers, and by making the process more complex and unclear, it will slow growth in our industry and discourage entrepreneurship.

A long-term, permanent solution can come only from a statutory fix. The definition of joint-employer must be codified into law so that it cannot be changed with a simple rule change. In 2017, AAHOA actively supported H.R. 3441, Save Local Business Act, legislation that would have done just that and prevented future administrations from arbitrarily changing the definition. Unfortunately, the bill failed to find sponsorship in the Senate. But with the new Congress convening on Capitol Hill, there is a renewed opportunity to make this a reality.

AAHOA continues to advocate for similar legislation that would clarify the definition because it is up to Congress to give small business owners one of the most fundamental tools for success – authority over their own business.

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