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What the Demise of the DOL’s Joint Employer Doctrine Means for Franchisees

While the nation is coming to terms with the culture shock of an unconventional president most Americans never expected, a sea change for the franchising community is also on the horizon. Over the past several years, the Obama Administration's US Department of Labor (DOL) and the National Labor Relations Board (NLRB) had pressed a 'joint employer' doctrine. It has threatened the practices of franchisors that have pushed the envelope in controlling the activities of would be "independent contractor" franchisees.

The political underpinning of the DOL’s joint employer doctrine was undoubtedly motivated by labor unions, notably the Service Employees International Union (SEIU), that are seeking to unionize fast food chains that hire millions of low wage workers, as well as to press for a significant increase in the federal minimum wage.  Needless to say, impacted franchisors and franchisees have joined in common cause to vigorously oppose the ‘threat’ of the joint employer doctrine.

On November 8, 2016 with the election of Donald Trump as President, and more correctly a month later on December 8, when the President-elect named Carl’s/Hardee’s CEO Andrew Puzder to serve as Secretary of Labor, the DOL joint employer threat effectively evaporated.

Puzder has been a vocal critic of the DOL that he is now designated to lead, but also a specific critic of the NLRB, and he has vigorously opposed the joint employer doctrine. The collective sigh of relief from franchisors across America should be palpable. Indeed, on January 27, 2017, the date of this posting, the International Franchise Association issued a press release congratulating the Trump administration for appointing an acting chairman of the NLRB who is deemed favorable to abandoning the joint employer doctrine.

The impact of abandonment of the joint employer doctrine on the franchisees of America is much less clear. At first blush, franchisees have strongly opposed the idea that their franchisors would be deemed to be joint employers of their local employees. Such a finding would clearly pose a threat of unionization of a franchisee’s labor force, and add significant pressure on franchisee labor costs. 

But the joint employer ‘threat’ has pressured franchisors to protect franchisee control of their local businesses, and for the past thirty years franchisees have sought to protect their ownership rights and equity in their franchised businesses.

Over the past two years franchisees have made unprecedented progress in achieving franchisee protective legislation that had been previously vigorously and successfully opposed by the International Franchise Association.  It may be no coincidence that just last year the IFA supported franchisee rights legislation in California that it had successfully defeated a year earlier. The joint employer threat clearly has been a major influence on franchisor willingness to soften the stance on franchisee rights that were previously opposed.

The AAFD had been urging franchisees to ‘oppose’ the joint employer doctrine by urging greater respect for franchisee rights and by negotiating for greater independence and equity in their franchised businesses. Essentially, franchisees have benefited by the NLRB joint employer doctrine, because it provided significant incentives for franchisors to return business ownership and control back to franchisees. 

Assuming Andrew Puzder is confirmed as Labor Secretary, we can expect his first action to be the retraction of the joint employer doctrine. Pressure on franchisors to tread lightly in exercising control over franchisees will be relieved, and we can expect a return to battles of ever increasing franchisor control, and likely to greater opposition to franchisee efforts to achieve legislative protection.

At the AAFD’s 25th Anniversary Franchisee Leadership Summit (www.AAFD.org/conference), April 30 to May 3, a distinguished panel of legal and franchisee association leaders will be examining the Joint Employment Threat: Its Impact of Franchised Owned Businesses. We will have an opportunity to focus on trends and consequences, and hopefully to consider strategies that will protect a franchisee’s rights as an independent business owner and sole employer of his or her employees.

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About Robert Purvin

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Robert Purvin is the Chairman and CEO of the American Association of Franchisees and Dealers, a national non-profit trade association that is dedicated to supporting and protecting the rights of franchise owners.

The AAFD's mission is to define, identify and promote Total Quality Franchising practices, and the AAFD supports is mission by:

  1. Promoting strong and effective independent franchisee associations as affiliated chapters of the AAFD.
  2. The development of the AAFD's Fair Franchising Standards, the most comprehenisve body of negotiated principles of recommended franchise practices in existence.
  3. The advocacy of fair and balanced franchise agreements and relationships that respect the legitimate business interests of both franchisors and franchisees for the good of the franchise relationship.
  4. The education of franchisees and prospective franchisees by the development and publication of the AAFD Fair Franchising Standards and the promotion of the AAFD Franchisee Bill of Rights.

The AAFD is actively forming independent franchisee associations as fully managed and supported chapters of the AAFD of all franchise systems operating in the United States.  For more information:

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