Franchisors ask Biden to pull the plug on a broadened joint-employer definition

Following a Senate vote to scuttle the new franchising standard, opponents are hoping to avert a presidential veto.
Will Biden suspend his pro-union stance to kill the joint employer redefinition? | Photo: Shutterstock

After convincing Congress and a federal court to halt a regulatory change vehemently opposed by restaurant franchisors, the franchise community and its representatives are now hoping to kill the initiative—at least for now—by winning over President Biden.

Groups like the International Franchise Association (IFA) and the National Restaurant Association (NRA) are urging the president not to veto a rare congressional resolution to overturn the National Labor Relations Board’s redefinition of “joint employer.”

The restated standard would greatly broaden the situations where a franchisor would be held accountable for the employee policies and actions of their franchisees. The NLRB has proposed that franchisors be exposed to the same penalties, litigation and union action as a franchisee if they so much as suggest staffing levels and the responsibilities a position should carry.

The new definition would have replaced a much narrower standard that held franchisor and franchisee to be joint employers if the brand parent was actively co-managing a staff through actions like setting wage rates or deciding whom to hire.

Franchisors have said the increased exposure would force them to restrict or discontinue expansion via franchising, a growth option used on a near-universal basis by chains. They have argued through representatives like the International Franchise Association that the NLRB overstepped its powers by decreeing such a radical change and then not responding to public opposition to the switch, as the federal rule-setting process requires.

The opponents argued that point before a U.S. District Court judge in Texas. Days before the new definition was set to take effect, the judge ruled in favor of the plaintiffs, blocking adoption of the standard. But his ruling is widely expected to be appealed by the NLRB.

As the Texas trial was underway, the opponents lobbied Congress to block the rule change through a rarely exercised power that was granted to lawmakers by a 1990s law called the Congressional Review Act. The measure allows the legislative branch to undo regulations that are promulgated by the executive branch.

In late January, the House of Representatives voted to invoke the act and scuttle the NLRB’s redefinition of joint employer.

On Wednesday, the Senate followed suit in a rare show of agreement between the two congressional chambers.

The measure blocking enactment now goes to President Biden, who has indicated that he would veto any congressional effort to block the new joint employer standard.

The new rule is strongly supported by organized labor, a critical ally of Biden, because it promises to foster collective bargaining within a chain. If the franchisor is considered a joint employer of its franchisees’ employees, it would be drawn into the contract negotiations of any unionized franchisee.

Biden has made the revitalization of organized labor a key objective of his administration.

Hours after the Senate passed H.J. Res. 98, the congressional measure blocking the new definition, the IFA sent Biden a petition imploring him not to veto the congressional resolution. It was signed by 5,300 individuals from the franchising industry.

The petition reads, “Mr. President, we implore you to use your influence and authority to send the recently promulgated NLRB joint employer rule back to the drawing board by signing H.J. Res. 98 into law. We know the rule will cost small businesses gravely, and you can return the hope and confidence they need by affirming this legislation.”

President Biden can be both pro-union and pro-franchising, but not if he supports this joint employer rule,” IFA CEO Matt Haller added in a statement.

According to the National Restaurant Association, about a third of the restaurant industry exists because of franchising.

“We hope President Biden will give serious consideration to signing the resolution,” said Sean Kennedy, the association’s EVP of public affairs.

The NLRB has not commented publicly on the Senate’s passage of the resolution.

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