House Republicans will try to kill a National Labor Relations Board rule that would effectively make it easier for millions of workers to form unions by declaring that major corporations are joint employers with certain franchisees and independent contractors.
The House scheduled a vote Friday on a resolution introduced by Rep. John James (R-MI), in the latest attempt by Republicans to roll back President Joe Biden‘s labor-focused agenda. The legislation has virtually no chance of succeeding, given the current makeup of the Democratic-controlled Senate.
Furthermore, Biden himself issued a threat to veto the resolution should it eventually land on his desk.
“Workers have the right to bargain for fair wages and working conditions with every company that directly or indirectly controls their terms and conditions of employment. Too often, companies deny workers this right by hiding behind subcontractors, staffing agencies, and temporary agencies,” the White House wrote on Jan. 8. “Reversing this rulemaking will prevent workers from exercising their right to bargain for higher wages, better benefits, and safer working conditions. Simply put, this legislation would mean lower wages for working families.”
James, in turn, told the Washington Examiner, “If Joe Biden vetoes my resolution to support Americans hoping to achieve the American Dream, then Americans should veto Joe Biden.”
Still, the NLRB joint employer rule has been hotly debated since being finalized in October of 2023, and critics claim that the change will unfairly open small businesses to labor lawsuits they should not and cannot afford to tackle.
Alfredo Ortiz, president and CEO of the Job Creators Network, told the Washington Examiner that Biden’s NLRB rule “threatens millions of small business franchises and contractors.”
“These small businesses will lose out on entrepreneurial opportunities as big corporations stick to established players to avoid potential lawsuits associated with the new standard,” he wrote in a statement. “Along with this week’s final rule upending independent contracting, the joint-employer standard is part of the Biden administration’s broader war on small businesses.”
The rule itself supplants NLRB standards set by the Trump administration in 2020 that expanded on the joint-employer definition included in the Fair Labor Standard Act of 1938. Those definitions required companies found to be sharing employees to be responsible for upholding certain workplace standards.
According to the Biden administration, the new rule “more faithfully grounds the joint-employer standard in established common-law agency principles.”
The Trump era rule required showing “substantial direct and immediate control” over essential terms and conditions of employment in order to qualify for joint-employer status.
Those employment conditions, according to the NLRB, are defined as:
- Wages, benefits, and other compensation
- Hours of work and scheduling
- The assignment of duties to be performed
- The supervision of the performance of duties
- Work rules and directions governing the manner, means, and methods of the performance of duties and the grounds for discipline
- The tenure of employment, including hiring and discharge
- Working conditions related to the safety and health of employees
However, the new NLRB standard sets a much lower threshold for establishing joint-employer status. Instead of just establishing “direct” control over employment terms, a joint-employer status can be established through what NLRB calls “reserved” or “indirect” control. Additionally, that control need not ever be directly exercised to establish the relationship.
In reality, the rule greatly expands the scope of collective bargaining power for employees at joint-employer companies and could potentially expand the relationship to any company using third-party intermediaries, including but not limited to staffing agencies, franchisors and franchisees, and contractors and subcontractors.
The rule, for example, could require McDonald’s to bargain with workers at franchises.
Sean Higgins, a labor policy expert at the Competitive Enterprise Institute who generally thinks joint-employer standards are a “good idea,” told the Washington Examiner that the new NLRB rule is “just overly broad.”
“Indirect control is just a term of art that doesn’t really mean anything. What’s indirect control mean? There’s no actual definition,” Higgins explained. “So if any company has any sort of connection, however tangential to another one, you can argue that they’re having indirect control over the other company’s policies, and reserve control goes even further than that because it says the first company doesn’t even have to do anything.
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“It doesn’t even have to be aware of policy violations at the second company as long as there’s some sort of tangential connection, and hypothetically, the first company could have prevented a violation of the second one, then that company is liable for any violations at the other that occurred.”
The NLRB rule change was set to go into effect on Dec. 26, 2023, but the board delayed that timeline until late February, pending the results of a lawsuit filed by the United States Chamber of Commerce in a Texas District Court. The Service Employees International Union, which supports the rule change, filed a subsequent petition for review in the U.S. District Court of Appeals for the District of Columbia.
