USA Law and Practice Contributed by: David B. Ramsey and Michelle Murray-Bertrand, Kaufmann Gildin & Robbins LLP
6.5 Vertical Agreement Block Exemptions US franchise law does not provide a general exemp - tion from franchise regulation based solely on the competitive effects or benefits of a particular franchise system. 7. Joint Employer Risk and Vicarious Liability 7.1 Joint Employer Laws There have been court and administrative agency decisions in the USA holding a franchisor jointly liable with the franchisee for claims by employees, although court decisions in that respect have been relatively few compared to the number of court decisions hold - ing the opposite. The past ten years have been marked by regulatory uncertainty and whiplash from a US federal regula - tory perspective in regard to what the joint employer standard shall be for holding a franchisor jointly liable with the franchisee for claims by employees, with standards of federal executive agencies changing as presidential administrations have gone back and forth between the two major political parties in the USA (Democrats and Republicans). One source of the regulatory uncertainty has been the National Labor Relations Board (NLRB). After many decades of articulating a joint employer standard (based on its interpretation of common law agency principles) that required a franchisor to have substan - tial direct and meaningful control over essential terms and conditions of employment in order to be deemed a joint employer, in 2015 the NLRB expanded that standard to include reserved rights to exert control, as well as indirect and limited control, in its decision in Browning - Ferris Industries of California , Inc , 362 NLRB 1599 (2015). Much litigation ensued regarding the joint employer standard, including the appeal of that case to federal court in 2018, where the DC Cir - cuit court upheld (in part) the NLRB’s broadened joint- employer standard. In 2020, the NLRB turned to rulemaking to codify a different standard, similar to the pre- Browning Ferris standard, by issuing the joint employer rule: a nar -
rower test making an entity a joint employer only if it possesses and exercises substantial direct and imme - diate control over one or more essential terms and conditions of employment, and defined those terms. In 2023, under a Democrat-run presidential adminis - tration, the NLRB rescinded its 2020 rule and issued a new joint employer rule, again expanding the stand - ard for joint-employer status. However, that rule was vacated by a federal district court in Texas before it went into effect, in Chamber of Commerce of the USA v NLRB . The NLRB initially appealed the decision but voluntarily dismissed the appeal in July 2024, con - cluding the case. On 27 February 2026, the NLRB issued a new joint employer rule, withdrawing its 2023 rule and reinstat - ing its 2020 rule that an entity is a joint employer only if it possesses and exercises substantial direct and immediate control over one or more essential terms and conditions of employment. However, that 2020 rule continues to be subject to challenge in pending lawsuits in the federal courts. In the meantime, at the time of this writing, federal legislation (the American Franchise Act, HR 5267) is pending a floor vote in the US House of Representatives, which would codify the 2020 joint employer standard with regard to fran - chises. A further source of regulatory uncertainty over this subject in the last ten years has been another federal executive agency, the US Department of Labor (DOL), which has changed its rule in this regard as presiden - tial administrations have changed from Republican to Democrat, and now back to Republican (although the current administration has thus far left in place its predecessor’s standard, while proposing a new one in April 2026). Currently, the DOL still applies an “economic realities test” to determine when there is a joint employment relationship, determining the nature of the relationship based “upon the circumstances of the whole activ - ity”. Various federal courts have articulated different factors under this same test, which is broad in nature and open to much interpretation. Cases in the last few years applying the “economic realities” test sug - gest that, in so much as a franchisor can demonstrate
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