The window for restaurant franchisors to fend off broader accountability for the employment practices of franchisees has been extended for two months.
A controversial new standard for determining when the home office of a chain can be sued or sanctioned for the labor lapses of franchisees was scheduled to be adopted on Dec. 26. But the federal agency charged with policing franchisors’ broadened responsibilities for franchisees’ labor practices said Thursday that it would delay enforcement until Feb. 26, 2024.
The watchdog agency, the National Labor Relations Board (NLRB), said it was delaying adoption of the new joint-employer definition because of pending legal challenges.
A group of trade associations filed a lawsuit in a Texas federal court earlier this month to block adoption of the new standard. The suit alleges that the NLRB exceeded its statutory authority by drafting such a broad standard.
It also accuses the agency of ignoring public input that warned of catastrophic results for franchising. Opponents of the new definition say chains will likely forgo franchising or be far more cautious in selecting licensees because their liability would be increased exponentially.
Those opponents are also attempting to thwart adoption of the new standard by pressing Congress to exercise its seldom-used power to review and reject rules decreed by the executive branch. The lawmakers are entitled to do so under a little-known law called the Congressional Review Act, which was passed in the 1990s to roll back an outgoing administration’s regulatory moves after the opposing party takes power.
“Delaying implementation of this rule is an acknowledgement of what we have been saying all along: this proposal is unworkable and congressional action to kill it once and for all remains paramount,” Matt Haller, CEO of the International Franchise Association, said in a statement.
The group is one of the plaintiffs in the Texas lawsuit, along with the Texas Restaurant Association and the Restaurant Law Center, the litigation arm of the National Restaurant Association.
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