Under Revised NLRB Rule, Franchisees and Franchisors Could Be Considered Employers of Workers at Franchise Businesses
This week, the House of Representatives is expected to vote on H.J.Res.98, which is a Congressional Review Act (CRA) resolution that would overturn the National Labor Relations Board’s recent expansion of the joint employer rule. The House Rules Committee was to meet Tuesday, Jan. 9, to formalize a vote on the resolution, and the full House vote is scheduled for Friday, Jan. 12, according to Bloomberg Law.
The CRA resolution is led by Rep. John James, a Michigan Republican, and it is co-sponsored by 68 additional House members and 39 senators. The House Education & Workforce Committee approved the resolution on Dec. 12, and it needs a simple majority for passage in the House and Senate.
The NLRB has stayed busy throughout Fiscal Year 2023, with the board stating that unfair labor practices filings increased 10% and union petitions have risen by 3%. It reported a total of 22,448 cases filed during the period, the highest number since Fiscal Year 2016. The new rule, issued last Oct. 26, could bring more cases forward.
Reaction from IFA
The International Franchise Association is pleased to see lawmakers challenge the amended NLRB joint employer rule, which can designate both franchisors and franchisees as legal employers of employees and contract workers in franchise businesses. The rule would apply when franchisees and franchisors have control over working conditions such as pay, scheduling, discipline and supervision, even if that control is indirect or not exercised, as explained in a Reuters report.
“We are grateful that the Congress is quickly taking up the joint employer issue,” Michael Layman, the IFA’s senior vice president of government relations and public affairs, said in a news release from the organization. “We need Congress to stand up for small businesses whose livelihoods will be upended by this rule,” which he said imperils both franchisors and franchisees.
In the IFA news release, the association said the new NLRB rule “goes further than an Obama-era standard that cost franchises $33.3 billion each year, destroyed 376,000 jobs and led to 93% more lawsuits.” Other trade groups panning the NLRB rules change have said it would complicate bargaining. Reuters elaborated that critics say the new rule would improperly drag companies to the bargaining table when they have little control over working conditions. In particular, franchisors assert that the rule undermines the franchise model by requiring them to bargain with the employees of individual franchisees.
Pushback from White House
On Monday the White House pushed back against the House of Representatives’ plan to eliminate the new rule. Reuters reported that President Biden would veto congressional action to stop the rule from taking effect Feb. 26 as scheduled. The White House Office of Management and Budget (OMB) released a statement saying that the resolution would hamper workers’ rights to bargain for improved working conditions. “Too often, companies deny workers this right by hiding behind subcontractors, staffing agencies and temporary agencies,” the OMB statement said.
The new rule would replace a Trump-era regulation requiring that business entities have “direct and immediate” control over workers in order to be considered joint employers. Business groups preferred that older regulation. In November 2023, the U.S. Chamber of Commerce and other business groups filed a lawsuit seeking to block the rule from taking effect. The Small Business and Entrepreneurship Council encourages “small business owners to weigh in with their U.S. House members, and we appreciate those who have been responsive to date in contacting key offices that will be critical to a successful vote outcome.”
If the House and Senate vote to scuttle the NLRB rule change and Biden vetoes that action, lawmakers would need a two-thirds majority to overcome the veto.
