The National Labor Relations Board has proposed a new rule stating a company can be named a joint employer “only if it possesses and exercises substantial, direct and immediate control over the essential terms and conditions of employment and has done so in a manner that is not limited and routine.”

THE NATIONAL LABOR Relations Board has taken the first step toward changing the troublesome joint-employer ruling that threatens the status of America’s franchising industry.

The NLRB last week gave notice to a government regulatory agency that it will establish new standards for determining joint-employer status. It is the first step toward addressing confusion over when hotels and other businesses may be liable for benefits for employees provided by outside agencies.

The current state of affairs was muddled after the board in February vacated a previous decision following a federal court ruling. The current NLRB ruling impacts franchisers and their licensees’ business decisions as franchisers would be considered joint employers with franchisees. Opponents of the NLRB ruling say it makes franchisers unfairly liable for workforce issues at franchisees’ businesses and robs owners of the autonomy established in traditional licensing contracts.

Last week the Office of Information and Regulatory Affairs published the NLRB’s submission to the Unified Agenda of Federal Regulatory and Deregulatory Actions regarding the consideration for rule making, according to the NLRB. The next step is the issuance of a Notice of Proposed Rule Making. A majority of the five-member board would have to approve any new rule.

On Feb. 26, the NLRB vacated its 2017 decision in Hy-Brand Industrial Contractors Ltd. and Brandt Construction Co. in response to a court finding that one of the board members had a conflict of interest in that case. As a result, the board’s definition on joint employers under the National Labor Relations Act and the Fair Labor Standards Act reverts to the 2015 Browning-Ferris Industries case, which the Hy-Brand decision had overruled.

“Whether one business is the joint employer of another business’s employees is one of the most critical issues in labor law today,” said NLRB Chairman John Ring. “The current uncertainty over the standard to be applied in determining joint-employer status under the FLSA undermines employers’ willingness to create jobs and expand business opportunities. In my view, notice-and-comment rulemaking offers the best vehicle to fully consider all views on what the standard ought to be.”

AAHOA President and CEO Chip Rogers welcomed NLRB’s decision to move forward on rulemaking in a statement last week.

“The Browning-Ferris Industries decision created chaos and uncertainty amongst franchisers and franchisees alike and continues to threaten the successful franchise business model that has been the path to small business success for so many AAHOA members,” he said. “The joint-employer doctrine is one of the most important issues facing hoteliers today, and we are optimistic that Chairman Ring understands the value in resolving this matter.”

Meantime, Rogers said, AAHOA will continue to advocate for the Save Local Business Act. “SLBA would codify the historical joint-employer standard and prevent the type of politicized bureaucratic bulldozing of decades of precedent that got us here in the first place.”

In June 2014, AAHOA Vice Chairwoman Jagruti Panwala, who last week testified before Congress about the impact of the industry on the American economy, appeared before the House Committee on Education and the Workforce Health, Education, Labor & Pensions Subcommittee in a hearing on the joint employer status. At that time the NLRB had expanded its definition of the status to include franchisers.

AAHOA and the American Hotel and Lodging Association are part of the Coalition to Save Local Businesses, which has been advocating for congress to pass the SLBA. The coalition also includes the International Franchise Association, National Restaurant Association and the U.S. Chamber of Commerce.

Under Browning-Ferris, the NLRB can find two or more companies to be joint employers if they both determine essential terms and conditions of employment of a single work force, said an article in in The National Law Review. “Under Browning-Ferris, the primary inquiry is whether the purported joint employer possesses the actual or potential authority to exercise control over the primary employer’s employees, regardless of whether the company has in fact exercised such authority,” the article said. “This standard is viewed as employee and union-friendly, and led to the issuance of complaints alleging joint employer status in an increased number of circumstances.”