In Congressional Hearing, IFA™s Haller Details Importance of Franchise Business Model, Sounds Alarm on NLRB™s Joint Employer Rule

“With Joint Employer Looming, Franchising Stands At The Crossroads.”

WASHINGTON – Testifying before a key congressional subcommittee, Matt Haller, president and CEO of the International Franchise Association (IFA), highlighted the significant economic benefits of the franchise business model, while warning lawmakers of the severe economic consequences of the National Labor Relations Board’s (NLRB) final joint employer rule.

“While declaring a franchisor and its franchisees to be joint employers might reduce some obstacles to unionization across franchise systems, it would have the devastating consequence of destroying the franchise business model that powers the U.S. economy,” said Haller. “Should the NLRB be allowed to proceed with its proposed rule, it would break the franchise model. Congress must step in and preserve this business model that has helped thousands of brands provide the American Dream of small business ownership to people from all walks of life.”

Finalized in October 2023 and scheduled to take effect in February 2024, the final joint employer rule would disrupt the franchise model by collapsing the independence of franchisees as business owners, making them employees of and/or co-employers with their franchisor. The rule would also diminish franchisees’ equity in their businesses and force franchisors to offer less support. New research from Oxford Economics details franchisees’ concerns with the proposal.

As written, the NLRB rule would result in:

- Lost jobs. The 2015 Browning-Ferris standard cost an estimated 376,000 job opportunities among franchise businesses.

- Increased litigation. From 2015 to 2017, Browning-Ferris led to a staggering 93% increase in joint employment-related charges or petitions being filed at the NLRB, and a sharp increase in litigation costs for small businesses.

- Restricted support to franchise small business owners. To protect themselves from frivolous litigation, the 2015 Browning-Ferris standard compelled franchisors to limit their communication on employment-related matters, including compliance education, HR, and legal resources previously offered to franchisees. These changes negatively affected the value of proposition of going into business alongside a brand partner.

In his testimony, Haller stressed the importance of the bipartisan Congressional Review Act (CRA) resolution of disapproval that would overturn the final joint employer rule, an effort led by U.S. Representatives John James (R-MI) and Virginia Foxx (R-NC) and U.S. Senators Bill Cassidy (R-LA) and Joe Manchin (D-WV). Haller also praised H.R. 2826, the Save Local Business Act, introduced by U.S. Rep. James Comer (R-KY), which would codify a permanent joint employer standard based on direct and immediate control of a business, as well as language in the House Appropriations Committee’s FY 2024 Labor, Health and Human Services and Education Appropriations bill to prohibit funding for finalization/implementation of the joint employer rule.

“If Congress does not stop the NLRB from advancing its joint employer rule, franchising could go away. That is what’s at stake here,” concluded Haller.

Through all of these challenges, Haller highlighted the unique benefits of franchising – including providing unmatched business ownership opportunities to people from all walks of life, especially to underrepresented communities. Nearly one-third of franchise owners say they wouldn’t own a business without franchising. He noted how franchises on average pay higher wages, offer more generous benefits, and provide greater opportunities for advancement than their independent counterparts.

Haller testified before the U.S. House Subcommittee on Health, Employment, Labor, and Pensions, a subcommittee of the House Education and Workforce Committee. The hearing was titled, “Protecting Workers and Small Businesses From Biden’s Attack On Worker Free Choice and Economic Growth.”

A complete copy of Haller’s written testimony can be accessed here. Video of the hearing is also available here.

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About the International Franchise Association:

Celebrating over 60 years of excellence, education, and advocacy, the International Franchise Association (IFA) is the world’s oldest and largest organization representing franchising worldwide. IFA works through its government relations and public policy, media relations, and educational programs to protect, enhance and promote franchising and the approximately 830,000 franchise establishments that support nearly 8.8 million direct jobs, $896.9 billion of economic output for the U.S. economy, and almost 3 percent of the Gross Domestic Product (GDP). IFA members include franchise companies in over 300 different business format categories, individual franchisees, and companies that support the industry in marketing, law, technology, and business development.