A Hail Mary effort to block a regulatory change much feared by restaurant franchisors moved closer to succeeding Friday when the U.S. House of Representatives gave the pending redefinition of “joint employer” a thumbs-down.
The chamber approved a resolution by a 206-177 vote to scuttle the broad new definition that’s been put forth by the National Labor Relations Board, the federal agency that regulates union organizing. Congress has used the review-and-rescind process to kill regulatory changes just a handful of times since legislators gave themselves that power in the 1990s.
The review resolution now moves to the Senate, where its fate is uncertain. The new definition is favored by organized labor, a major constituency of Democrats, and that party controls the upper chamber.
However, opponents of the redefinition stress that the resolution passed in the House because Democrats joined Republicans in voting for it.
“We commend lawmakers for defending franchising on a bipartisan basis by rejecting a rule that needlessly harms the franchise business model,” Matt Haller, CEO of the IFA, said in a statement.
“Congress doesn’t agree on much these days, but today’s bipartisan vote makes clear there is support for overturning the National Labor Relation Board’s overreaching Joint Employer Rule,” Sean Kennedy, EVP of public affairs for the National Restaurant Association, said in a statement from that group. “We appreciate the House taking the first step in this process and we hope that the Senate will follow.”
The new standard would classify franchisors as joint employers of franchisees’ staffs if headquarters have the potential power to influence licensees’ labor policies, regardless of whether it’s exercised.
Under the looser standard, that potential influence could include merely recommending what responsibilities each position within a franchised restaurant should carry.
Being designated a joint employer would make franchisors accountable in court or the eyes of regulators for any infraction of labor rules by their franchisees. Advocacy groups like the International Franchise Association have said the heightened vulnerability will prompt franchisors to opt for corporate development over franchising or to expand solely through a few trusted and familiar franchisees.
In general, those opponents say, the new definition would fundamentally change franchising and appreciably reduce opportunities for entrepreneurs hoping to start their own businesses. The most vehement critics say the new standard would virtually halt franchising.
“Today’s House vote is a victory for common sense,” Chip Rogers, CEO of the American Hotel & Lodging Association, said in a statement. “Neither companies nor their employees want this job-killing regulation, which will destroy the franchise model that supports millions of small business jobs.”
The Senate version of the resolution has 44 sponsors. Approval of the measure would require seven more lawmakers to vote in favor of it.
Correction: An earlier version of this story erroneously reported that the president's signature is not needed for a congressional resolution to take effect. In fact, that approval is required.
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