President Joe Biden struck a major blow to efforts by franchising advocates to overturn the National Labor Relation Board’s Joint Employer Rule.
On Friday, President Biden vetoed a Congressional Review Act resolution passed by both chambers that would have overturned the NLRB’s rule. Announced in October 2023, the NLRB’s updated standard would require a franchisor to share in the liability for labor violations with franchisees, and set a legal obligation for them to also negotiate with unions.
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To push back against the rule, lawmakers utilized the Congressional Review Act, which can rescind an agency’s policy. The House of Representatives passed its CRA resolution in a 206-177 vote in mid-January with eight Democrats joining 198 Republicans.
The Senate voted 50-48 April 10 to send the bill to the White House, with Sens. Joe Manchin, D-WV, and Krysten Sinema, I-AZ, joining 48 Republicans. Two senators from each party didn’t vote and Sen. Josh Hawley, R-MO, voted against.
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After the Senate’s vote, the International Franchise Association sent a petition with more than 5,000 signatures from the community urging Biden to sign the legislation. However, the White House released a statement expressing support for the new standard.
“The NLRB’s rule would prevent companies from evading their bargaining obligations or liability when they control a worker’s working condition – even if they reserve such control or exercise it indirectly through a subcontractor or other intermediary,” Biden said in statement. “If multiple companies control the terms and conditions of employment, then the right to organize is rendered futile whenever the workers cannot bargain collectively with each of those employers.”
Biden also stated that without the rule, “companies could more easily avoid liability simply by manipulating their corporate structure, like hiding behind subcontractors or staffing agencies.”
“I make no apologies for my administration protecting the right to organize and bargain collectively,” Biden said.
In a statement after the veto, IFA President and CEO Matthew Haller condemned Biden’s action.
IFA President and CEO Matt Haller
“President Biden claims to be a champion for small businesses, but today he turned his back on franchising, a business model that’s done more to put countless Americans into small business ownership, particularly for traditionally underrepresented minorities, women and veterans,” Haller said. “The administration has solidified its position that it cares more about special interests than small business owners and their employees, who face a near-daily onslaught of costs and uncertainties from the Biden administration’s regulatory assault.”
The IFA also noted in its release negative impacts from a similar rule put in place during President Barack Obama’s time in office that was replaced in 2020. Under that standard, the IFA claims there was a 93 percent spike in lawsuits and the cost to businesses was $33.3 billion per year.
While efforts against the new rule met a roadblock legislatively, progress was made in the courtroom. On March 8, U.S. District Judge J. Campbell Barker in Tyler, Texas, struck down the rule, which was set to take effect March 11.
The lawsuit was filed in the U.S. District Court for the Eastern District of Texas by the U.S. Chamber of Commerce and was supported by the IFA and other groups. The suit claimed that the NLRB exceeded the scope of its authority and violated the Administrative Procedure Act by failing to respond to comments regarding the rule’s economic consequences.
In his decision, Barker wrote that the rule, “would treat virtually every entity that contracts labor as a joint employer because virtually every contract for third-party labor has terms that impact, at least indirectly … essential terms and conditions of employment.”