Although we cannot predict all of the areas where a Trump presidency may affect franchising, the likely immediate suspects are the test for joint employment along with the Federal Trade Commission’s review and potential changes to the Franchise Rule.
Potential Effect on Joint Employment Test
The fight over the appropriate test to determine joint employment has been raging since 2015 when the National Labor Relations Board (NLRB) expanded the scope of the test in Browning-Ferris, much to the chargin of many franchisors. This expansion of the test faced scrutiny by the courts and others resulting in the NLRB in 2023 issuing a new rule amending the test for joint employment and focusing on the ability of the putative employer to directly or indirectly control, or exercise the power to control, one or more of the essential terms of employment of the putative employee. This expansion of the test by the NLRB was subsequently successfully challenged resulting in a return to the “direct and immediate control” test, a test which is much more favorable to franchisors.
With the change in administration, and if history is any predictor, it is possible that the Trump Administration will seek to codify the test. However, the question becomes, how quickly can that happen?
The NLRB board members, including the general council, have historically completed their five-year terms regardless of which president appointed them or if there is a change in presidential administration. However, in 2021, President Joe Biden removed the NLRB’s general council, Peter Robb, from office on his first day as President. This decision, while controversial, was allowed by the courts. It is highly likely that President-elect Donald Trump will follow suit and replace the current NLRB general council, Jennifer Abruzzo, on his first day in office, January 20th.
Similarly, other board members could be replaced even though the National Labor Relations Act states that the only rationale allowed for removal by the President must be for neglect of duty or malfeasance in office. The constitutionality of these protections has been challenged and may even make its way to the United States Supreme Court. Because this legal challenge is looming, the Trump Administration may move forward with removing certain board members knowing the Supreme Court’s conservative majority may likely rule in favor of ending such protections.
The newly appointed general council will issue a memo (likely within the first year of the Trump Administration) with a new list of mandatory submissions to the Division of Advice. This is a list of NLRB precedents the new general council will try to change. Assuming President-elect Trump moves forward with replacing the NLRB general council and select board members, the NLRB could very well enact some sweeping changes, including issuing a rule codifying the “direct and immediate control” test.
Potential Effect on the Federal Trade Commission (FTC)
The FTC has been more active in franchising during the Biden Administration then it arguably was during the prior two administrations combined. However, time will tell if that focus, including its review of the Franchise Rule, comes to an end under the Trump Administration.
The FTC is made up of five commissioners serving seven-year terms all nominated by the President of the United States and confirmed by the United States Senate. Any commissioner may be removed by the president for inefficiency, neglect of duty, or malfeasance in office. It is quite possible that President-elect Trump will fire the current chair of the FTC, Lina Khan. If President-elect Trump were to remove the chair, he could nominate a Republican, but he would have to follow rules regarding party representation for the rest of the commissioners. The Commission makeup is not allowed to exceed three commissioners of one political party. Furthermore, with a Republican majority in the Senate, the Trump Administration would ostensibly have the votes to confirm any nominations. Under a Trump presidency, the FTC could very well be run by a majority of commissioners who take a different approach to franchise regulation than the current FTC. However, this will likely be a longer-term process than that of the changes to the NLRB.
One thing is for certain, the times they are a changing. How fast and how much remains to be seen.