House Dems Look to Resurrect Harmful Obama-Era Labor Regulation

Industry study found that Obama rule cut 375,000 jobs

Rep. Rosa DeLauro (D., Conn.) / Getty Images
July 7, 2020

House Democrats are pushing to resurrect an Obama-era regulation that could harm U.S. businesses working to recover from the coronavirus pandemic.

The Trump administration in 2019 rolled back an Obama administration regulation that held parent companies responsible for labor violations committed by franchisees or contractors—otherwise known as the "joint employer standard." House Democrats, led by Rep. Rosa DeLauro (D., Conn.), are attempting to bring that regulation back.

DeLauro inserted language into a recent Labor Department funding bill that bars the use of funds "to implement or enforce, or take any actions in furtherance of" the Trump administration's joint employer status regulations. If passed, the move could harm franchise businesses during a time of economic uncertainty, Rep. Virginia Foxx (R., N.C.) told the Washington Free Beacon.

"The Obama administration's overly broad and confusing joint employer guidance deprived millions of Americans of entrepreneurial opportunities," Foxx, the ranking member of the House Committee on Education and Labor, said. "If successful, this ploy from the Democrats will be bad news for everyone who hopes to own a small business and pursue the American dream."

An International Franchise Association (IFA) study found that the Obama administration's approach led to the loss of 375,000 jobs at an economic cost of $33.3 billion even as the country emerged from the Great Recession. IFA senior vice president Matthew Haller told the Free Beacon that reintroducing the regulation could prove a fatal blow to many franchise businesses that are only now emerging from pandemic shutdowns.

"America's 730,000 franchise businesses have been serving as modern-day 'Good Samaritans'; feeding essential workers, sanitizing businesses, caring for the sick, elderly and vulnerable, and providing groceries, hardware, supplies and other critical products and services throughout the pandemic," Haller said. "Given the historic response by Congress and the Administration to keep the economy afloat right now, it would be devastating to have these same small franchise employers face costly new regulations at a time of economic uncertainty for small businesses and their employees."

DeLauro did not respond to a request for comment.

DeLauro's provision also comes as a boost to big labor. Service Employees International Union and other labor groups have long targeted franchise establishments for unionization. The business model provides numerous obstacles for organizers. Franchisees are generally small business owners who pay fees to corporations to operate under the national brand, forcing unions to organize on a store-by-store basis. The Obama administration standard, however, would allow labor groups to organize at the corporate level and capture dues from millions of employees in the industry.

House Democrats first unveiled the funding bill on Monday. The House Appropriations Subcommittee on Labor, Health and Human Services, Education and Related Agencies—which DeLauro chairs—will consider the proposal Tuesday.