Nearly three months after the U.S. House of Representatives voted to overturn the National Labor Relation Board’s new joint employer rule, the upper chamber followed suit.
In a 50-48 vote April 10, the U.S. Senate approved its own Congressional Review Act resolution to reverse the NLRB’s decision. The CRA is a tool allowing legislators to reverse the action of a federal agency, which in this case was a new standard for determining joint employer status.
The NLRB announced the new standard in October 2023, but it has yet to go into effect because of challenges in federal court. If it were to take effect, a franchisor could share the liability for labor law violations with franchisees, and a legal obligation would exist for the franchisors to negotiate with unions.
With both chambers voting in favor, the resolution now goes to President Joe Biden’s desk for either a signature or a veto. To encourage the former, the International Franchise Association sent a petition with more than 5,000 signatures from the franchise community to the president following the Senate’s vote. The White House said in January Biden would veto an attempt to repeal the rule. A two-thirds vote in both the House and Senate would be needed to overturn a veto.
Michael Layman, IFA senior VP of government relations and public affairs, called Wednesday’s vote a “historic legislative victory for franchising.”
“The Senate had never voted on the joint employer issue the way the U.S. House had over the years,” Layman said. “It’s great, but the job is not done. We need the president to support the franchise model and also sign the measure. We think it’s an opportune time to use the CRA to lock in the direct control standard that really strikes the right balance between franchisor and franchisee.”
Michael Layman, senior vice president of government relations and public affairs for the International Franchise Association
The overwhelming majority voting in favor of Wednesday’s resolution were Republicans, with 48 supporting the measure. They were joined by Sens. Joe Manchin, D-WV, who co-authored the bill, and Kyrsten Sinema, I-AZ. Voting against were 47 Democrats and Sen. Josh Hawley, R-MO. Sens. Mike Lee, R-UT and Bob Menendez, D-NJ, did not vote.
The previous vote in the House also had slight bipartisan support, with eight Democrats joining 198 Republicans to pass the resolution 206-177. If successful, the congressional action would keep the current joint employer rule, set in 2020, in place.
A similar rule to the one introduced by the NLRB in October was in effect previously, though, which led to several challenges, according to the IFA. The association claims that under the previous rule, there was a 93 percent spike in lawsuits and it cost businesses $33.3 billion.
To halt the new attempt, in addition to the legislative front, the IFA supported legal action against the NLRB. The association was one of several supporters of a lawsuit filed by the U.S. Chamber of Commerce in the U.S. District Court for the Eastern District of Texas.
The lawsuit claimed 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. The rule was set to take effect March 11, but was struck down March 8 by U.S. District Judge J. Campbell Barker in Tyler, Texas.
Barker wrote 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.”
Because of potential challenges in court, Layman said the main priority remains on the legislative side of the battle.
“There’s uncertainty ahead in the courts, whether it’s appeals or other filings,” Layman said. “However, just by signing the CRA resolution into law, that will provide real certainty and prevent broad joint employer rules from being advanced in the future.”