Congress attempts to block passage of new joint employer ruleCongress attempts to block passage of new joint employer rule

Joanna Fantozzi

Less than two months after the National Labor Relations Board reintroduced the joint employer rule that would make companies jointly liable with their franchisees for labor terms and conditions such as union contracts, pay, scheduling, and more, a Congressional resolution is attempting to overturn the rule.

H.J. Res. 98 was introduced to Congress on Friday by Rep. John James (R-Mich.) as a Congressional Review Act resolution of disapproval, which would effectively negate the passage of the rule by the NLRB and render it ineffective. The resolution has been moved forward by the House Education & Workforce Committee and will be discussed in a committee session on Tuesday. H.J. Res. 98 received support from the National Restaurant Association, which pushed back against the original ruling, saying that it will sow chaos and create more legal questions than it answers.

“The 2023 NLRB rule redefines the Joint Employer Standard, creating uncertainty and increased liability for franchise operators,” the National Restaurant Association said in a statement. “Franchising has long been a pathway to business ownership and economic growth in the restaurant sector. This new rule threatens the very foundation of this model…. We urge lawmakers to recognize the detrimental impacts the NLRB's rule would have on franchising and independent operators who use third-party services. Supporting this resolution is vital for maintaining a stable and conducive business environment where all facets of the restaurant industry can thrive.”

Related:The first lawsuit has been filed to stop the new NLRB joint employer rule

The Congressional resolution if disapproval is just one hurdle the joint employer rule faces. The Restaurant Law Center and the Texas Restaurant Association joined several organizations led by the U.S. Chamber of Commerce to file a lawsuit against the National Labor Relations Board last month.

The history of the joint employer rule is a contentious one and has faced many legal challenges and undergone many changes during the last few presidential administrations. In 2015, during the Obama administration, the Browning-Ferris Industries decision set the standard for holding employers like franchisors legally liable for upholding labor standards and regulations, even if the parent company only had “reserved and indirect control” over the employees. In 2017, that rule was overturned during the Trump administration, and in 2020, the joint employer rule was replaced by a new one that did not hold franchisors responsible for franchisees’ adherence to labor rules and regulations. The current rule, passed in the Biden White House, is most similar to the 2015 rule, but with more parameters and points of clarification as a response to the criticism against the 2015 rule’s broadly-sweeping jurisdiction.

Related:Franchisors may be more liable for employees under broadened joint employer rule

If the resolution passes the committee, it would then head to the House floor to be voted on and if it passes, the joint employer rule would be overturned.

Contact Joanna Fantozzi at [email protected]