Congress Unlikely to Override Veto; Federal Judge Blocked Regulation in March
As expected, President Biden vetoed Congress’s repeal of the National Labor Relations Board’s joint-employer rule that considers franchisors to be employers of franchisees’ workers and, therefore, holds the parent company as well as the franchisee liable for labor infractions. The rule, resurrected by Friday’s veto, also requires the franchisor as well as franchisees to bargain with those workers’ unions.
Members of the House and Senate had blocked the rule by using their authority under the Congressional Review Act, part of the Small Business Regulatory Enforcement Fairness Act signed into law in March 1996. The CRA allows Congress, through simple majority votes on resolutions, to overturn executive agencies’ regulations if the president signs off on their resolutions. Congress has successfully overturned 20 agency rules, according to the Congressional Research Service.
Rule Likely to Stand
Congress narrowly passed the Republican-led resolution to repeal the NLRB rule so it is unlikely to achieve the two-thirds majority required to override the veto. In March, a federal judge in Texas struck down the rule but the NLRB probably will appeal his decision. A Bloomberg Law article speculated the NLRB might abide by the judge’s ruling within his East Texas district but enforce its new regulation elsewhere.
The NLRB rule would treat parent companies as co-employers of franchise and contract workers when they have control over major working conditions such as wages, schedules, supervision and disciplinary actions. The larger companies would be considered joint employers even if they do not exercise that control or if the control is indirect.
What Critics Say
Critics of the rule, including business groups such as the International Franchise Association and many Republicans, contend that the rule would unfairly force franchisors and other parent companies to negotiate with unions when they minimally control working conditions. They have lobbied extensively to prevent its taking effect. When the Senate overturned the rule in early April, the International Franchise Association had breathed a sigh of relief and was pleased that its congressional lobbying efforts had paid off.
IFA President and CEO Matthew Haller said the rule would be particularly harmful to underrepresented Americans such as minorities, women and veterans who have found entrepreneurial success through franchising. Republican Sen. Bill Cassidy of Louisiana agreed, saying the veto is detrimental to women and people of color who are empowered by the franchise business model, according to a Bloomberg Law report about the veto.
Bloomberg quoted Haller’s response to the veto as saying: “The administration has solidified its position that it cares more about special interests than small business owners and their employees, who face a near-daily onslaught of costs and uncertainties from the Biden administration’s regulatory assault.”
Sean Kennedy, executive vice president of public affairs for the National Restaurant Association, also blasted the veto. “The House and the Senate came together to pass a resolution that supported small business restaurant owners across the country, so it’s disappointing that the president chose National Small Business Week to veto it,” Kennedy said in a report by Nation’s Restaurant News.
Why Biden Supports Rule
In a memo to lawmakers, Reuters reported that Biden stated that he favored the rule because it prevents employers from evading legal obligations by indirectly controlling workers through contractors. “Republicans are siding with union-busting corporations over the needs of workers and their unions,” Biden’s memo said.
Also quoting from Biden’s statement about the veto, Bloomberg Law reported: “Without the NLRB’s rule, companies could more easily avoid liability simply by manipulating their corporate structure, like hiding behind subcontractors or staffing agencies. … I am proud to be the most pro-union, pro-worker president in American history. I make no apologies for my administration protecting the right to organize and bargain collectively.” The NLRB did not immediately issue a response after his veto.
