WASHINGTON – In late October 2023, the National Labor Relations Board (NLRB) released a final rule to expand the circumstances under which a company may be considered a joint employer. The new rule undermines the franchise business model by forcing liability on companies for another business’ employees, even if they do not directly manage them.

Additionally, it creates uncertainty among small and local businesses as to their legal liabilities, leading to higher operational costs and less opportunity to create jobs. North Dakota is home to 2,338 franchise locations, employing nearly 25,000 people. 

  

For over 25 years, a company could only be considered a joint employer if they have “direct and immediate” management over another business’ employees. The Obama administration changed this in 2015 and forced companies to be liable for another business’ employees if they held “indirect” and “reserved” control over their workers. The 2015 rule cost franchises an estimated $33 billion each year, 376,000 job losses, and expensive litigations.

In 2020, the Trump administration returned to the longstanding “direct and immediate” standard, providing liability relief to businesses.

On Wednesday, U.S. Senator Kevin Cramer (R-ND) cosponsored and voted in support of H.J. Res.98, a Congressional Review Act (CRA) resolution of disapproval to overturn the NLRB’s new joint employer rule.  The resolution passed the Senate by a vote of 50 to 48.

“This rule, crafted by out-of-touch D.C. bureaucrats, would negatively impact millions of workers and thousands of businesses if left in place,” said Cramer. “It represents another attempt by this administration to pursue unnecessary and costly regulation, at the expense of our nation’s workers and economy. Today’s vote repeals this egregious rule and protects the franchise business model in America.” 

North Dakota businesses like Anytime Fitness and Great Clips are directly impacted by this rule, and applauded Senator Cramer’s efforts to overturn it.

“I am thankful that Senator Cramer is working to stand up for my franchise business and the 2,000 franchise businesses across the state. He continues to support us against Washington, DC overregulation, and we appreciate his efforts to repeal this NLRB joint employer rule,” said Luke Andrus, North Dakota Anytime Fitness franchisee.

“The franchise model is an integral part in North Dakota’s thriving economy, and we are grateful to Senator Cramer for his steadfast support. The final joint employer rule is as unworkable as it is impractical,” said Emily Wilcox, North Dakota Great Clips franchisee. “This rule would remove the independence of small business owners like me and turn us into mid-level managers. Local franchise owners pour our heart and soul into our businesses, employees, and communities -- and now Washington is meddling in our affairs to satisfy their special interest allies. Thank you, Senator Cramer and all the other elected officials, willing to stand up for the franchise model before it’s too late.”  

In December 2022, Senator Cramer joined U.S. Senator Mike Braun (R-IN) and 42 Senate Republicans in a letter to NLRB Chairman Lauren McFerran opposing the proposed joint employer rule, and in September 2022, he sent a letter to the NLRB raising concerns about their efforts to modify the existing joint employer standard.

Click here to read the resolution.