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Setting the Standard: Understanding Joint-Employer Changes

If your company uses third-party labor or operates under a franchise model, the recently proposed joint-employer rule could have a significant impact on your business practices.

Not sure how? You’re not alone.

You can get the full details of how we got here in this blog post, but in short, this new rule would overturn the current Browning-Ferris joint-employer standard in a way that creates fewer restrictions for franchises and businesses that rely on third-party labor.

According to the proposed rule, a business will only be considered a joint employer of another company’s employees if it:

  • Co-determines the essential terms and conditions of employment for the other entities’ employees (such as hiring, firing, discipline, supervision and direction)
  • and both possesses and actually exercises substantial direct and immediate control over those terms and conditions in a way that isn’t limited or routine.

In contrast, according to the current Browning-Ferris standard, a joint-employment relationship may exist if one entity exercised, or reserved the right to exercise, direct or indirect control on employment matters.

Expected result: lowered risk of being considered a joint employer

This change would give franchisors more freedom to ensure brand standards are met and offer guidance to their franchisees without potentially risking joint-employer status. It would allow companies to ensure safety and quality control by granting some level of indirect control over contract labor – for example, asking third party workers to comply with safety training – without becoming a joint employer.

For example, maybe you have security guards contracted to protect your facility. Under the new standard, your company is less likely to be held liable for any “risky” action of those guards.

It would also lessen your liability for the actions of the other business entity’s workers, and obligation to participate in union negotiations. For example, let’s say you run a nationwide franchise. If unionized employees at just one of your locations have an issue with their franchise owner, the national franchise would be less vulnerable to lawsuits and not be required to bargain with unions representing the franchise workers. Under Browning-Ferris, there’s a chance it would.

This proposed rule marks a return to the pre-Browning-Ferris joint-employer test. Businesses will have more freedom to exercise indirect control over contract workers or franchisee employees to ensure brand standards and safety procedures are met without as great a risk of being considered a joint employer.

Disclaimer: This blog includes general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer licensed in your jurisdiction for advice on specific legal problems.