A Big New Number to Describe Joint Employer Pain
How painful has the expanded joint employer standard been? The IFA has numbers.
Everybody knows the National Labor Relations Board caused franchising’s biggest headache when it expanded the definition of who is a joint employer back in 2014. Now, new International Franchise Association research has put a number to the pain—$33.3 billion in lost economic output annually.
Also, the expanded standard, as stated in the Browning-Ferris case, led to 376,000 fewer job opportunities and resulted in a 93 percent increase in lawsuits against franchise businesses, said the report, released in late January.
Browning-Ferris said indirect control, whether or not it was exercised, was reason to hold an employer jointly liable for labor violations. The prior standard required direct control.
Although it’s impossible to know whether the new numbers are the gospel truth, there’s no doubt the pain has been considerable. The research consisted of 77 interviews with IFA members, including franchisors, franchisees and law firms or consultants to franchisors. Economist Ronald Bird, Ph.D, conducted the interviews.
Bird’s report said 71 of the 77 interviewees reported that franchisors have “implemented defensive distancing behaviors in the wake” of Browning-Ferris. “This is reflected in the dwindling amount of services franchisors are offering to their franchisees….Similarly, many franchisors have stopped providing advice or guidance to franchisees that request assistance with regard to personnel matters—such as compensation or disciplinary actions.”
The report also noted a 93 percent increase in alleged joint employer actions against franchisor/franchisees, with 122 such actions filed between July 2010 and July 2014, compared with 236 filed between July 2014 and July 2018.
Said the IFA’s Matt Haller on a conference call describing the report: “The point we’re making is that there was a clear standard in place for decades prior to 2014/15, prior to the board moving the goalposts, and we’ve tried to demonstrate the costs of changing your business model to an ambiguous standard.”
The IFA released its research on January 28, the deadline for the public comment period for the NLRB’s rulemaking process, which is an ongoing effort to re-define the joint employer standard.
“As you know the joint employer metastasis that began in 2014, it’s significantly ratcheted up over the last four years. And so this is sort of like cutting out the prime host of this disease, and allowing it to filter out of the system. It’s not going to end overnight,” Haller said.