GOP Leaders Back New Franchise Rule

Agency considers overturning one of Obama's most controversial work regs

Lamar Alexander
Lamar Alexander / Getty Images

Republican Congressional leaders are throwing their weight behind a new federal labor regulation reversing a controversial Obama-era ruling.

Sen. Lamar Alexander (R., Tenn.), chairman of the Senate Committee on Health, Education, Labor, & Pensions, along with party leaders in the House and Senate, sent a letter to the National Labor Relations Board asking it to restore joint employer standards that protect franchise businesses. The NLRB, the top federal labor arbiter overseeing workplace disputes and union elections, is considering a formal rule that would shield parent companies from being held liable for labor violations committed by franchisees or subcontractors. That standard stood for decades until the Obama NLRB's 2015 Browning Ferris Industries (BFI) ruling.

"The Board's BFI joint employer standard is the biggest attack on opportunities for American small businessmen and women to make their way into the middle class that anyone has seen in a longtime," Alexander said in the letter to Trump NLRB Chairman John Ring. "The Board's proposed standard will preserve the American Dream and economic benefits for millions by providing clear rules of the road."

Congressional Republicans now see rule making as the quickest path to overturning the liability standards of the Obama administration. Alexander sponsored a 2015 bill to restore the old franchise rules and the House passed similar legislation in a bipartisan vote in 2017, but neither has advanced through the Senate. Alexander and his committee colleagues said the agency had the right to determine how it would interpret the National Labor Relations Act.

"A joint employer must possess and actually exercise substantial direct and immediate control over the separate employees' essential employment terms and conditions in a manner that is not limited and routine," the Jan. 17 letter says. "The Board’s rulemaking will provide clarity and predictability needed by employers and unions alike."

The NLRB has already reversed a number of the rulings issued under the Obama administration since Trump gave Republicans their first majority on the five-member panel in a decade, but joint employer has proven harder to settle. The board re-established the old joint-employer standard in its Hy-Brand decision in December 2017. The new ruling was set aside after an agency ethics official said that board member William Emanuel should have recused himself because his old law firm had participated in joint employer-related cases. Rather than waiting for a new case to make its way through the agency and potentially open the pathway for recusal calls, the agency turned to the rulemaking process.

Industry groups have consistently opposed the Obama standard and welcomed the support of Senate Republicans. Matthew Haller, spokesman for the International Franchise Association, called Alexander "a long-standing champion" in the defense of the franchise model and a "commonsense joint employer standard."

"Franchise owners everywhere are grateful for his and the other senators' leadership and look forward to an end to the uncertainty and litigation minefield caused by the Obama era standard that caused a 93 percent increase in costly and burdensome lawsuits and upwards of 376,000 lost jobs," Haller said.

The agency will review the final proposal when the public comment period ends on Jan. 28.