The National Labor Relations Board (NLRB) last week reversed the controversial Browning-Ferris decision, reinstating the direct control rule for joint employers. This is good news for franchisees and franchisors because Browning-Ferris threatened to dismantle the franchise business model and the autonomy of franchisees as independent business owners.
The franchise business model offers a turnkey solution for entrepreneurs wanting to start their own business with limited out-of-pocket investment and reduced risk. The NLRB’s reversal on Browning-Ferris is a victory for the thousands of small business owners in Michigan operating individual franchisees.
The original Browning-Ferris ruling, issued in 2015, reversed a line of decisions stretching back more than 30 years by substantially widening the circumstances under which a joint-employer relationship could be found. The revised test was intended by the NLRB to expand the circumstances in which one company can be held responsible or liable for the conduct of another. Specifically, Browning-Ferris ruled that a joint-employer relationship could not be limited to “directly and immediately” exercised control. It instead assumed a joint employer could be liable if it “possesses the authority to control employees’ terms and conditions of employment” - regardless of whether such control was exercised.
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