Congressional Review Act vote shows cracks in joint employer rule

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A vote in Congress Friday showed off the cracks in the support for the National Labor Relations Board’s new “joint employer” rule. It is unlikely that Congress will follow through in actually rolling the rule back, but the vote signals that the lawmakers might just let it die on the vine instead.

The House voted 206-177 Friday to roll that back through the Congressional Review Act. The “yeas” included 8 Democrats while no Republicans voted against it. Notably, 50 members of Congress missed the vote entirely. Winter weather was the apparent excuse in many cases, but the fact that weighing in on the NLRB’s rule was not a priority for Democrats was telling given what a priority this is for unions. 

The rule is a hot potato because it is a threat to corporations that franchise and the independent businesses that carry their brands. Under the new rule, the parent corporation can be made liable for any workplace violation at the franchisee, most of which are legally separate businesses over which the corporation has no direct control. Previously, a business had to have direct control over another to be liable.

The new rule extends that liability to cases of “indirect control,” a term with no clear meaning, and even cases of “reserved control.” The latter extends liability to cases where the parent corporation had not exercised any control but theoretically could have. In short, the rule allows any businesses to be held liable for a violation at any other company it did business with. It’s all up to federal regulators.

“Any casual observer of American politics can understand how this blatant attempt to smuggle legal ambiguity into the otherwise clear-cut law will be abused by a weaponized and partisan agency. It will open every American franchisor and franchisee to lawfare from the Left if it does not toe the Democrat party line,” South Carolina Rep. Virginia Foxx, chairwoman of the House Education and Labor Committee, said during the CRA vote.

Unions have long pushed for this rule change. It would give them a means to pressure major corporations to unionize them and all of their franchisees in one fell swoop. Under the older direct control standard, unions would have to organize the franchisees one at a time, a much tougher proposition.

Rep. Bobby Scott (VA), the ranking Democrat on the House Education and Labor Committee tried to dismiss any fears of regulatory overreach. “It is important to point out that the NLRB has never found a franchisor to be a joint employer of its franchisee’s employees,” he said on the House floor. What he didn’t say was that the NLRB couldn’t do that under the old rule, but could under the new one.

The Democrats are being quiet about this because they are getting pushback from mom and pop-run franchisee businesses at home. Those folks are rightly afraid that they may either lose their contract to carry the corporation’s brand or be obligated to accept contracts that effectively make them employees of the corporation.

The CRA now moves to the Senate where Democrats hold the majority, so it likely to die. Look for it to die a quiet death though. Meanwhile, trade associations are challenging the rule in court. Should they succeed, Congress would have to amend the National Labor Relations Act to restore the NLRB’s rule. Friday’s vote suggests this Congress may take a pass.