President Vetoes Resolution to Overturn NLRB’s Joint Employer Rule

On May 3, President Joe Biden vetoed a resolution to overturn the National Labor Relations Board’s (NLRB’s) joint employer rule. However, the rule has been blocked by a federal district court in Texas, and litigation might continue.

Overcoming the veto by a two-thirds majority vote in the Senate and House of Representatives is unlikely. The resolution passed the House by a 206-177 vote on Jan. 12 and cleared the Senate by a 50-48 vote on April 10. SHRM had urged Biden not to veto the measure.

There has been significant opposition from stakeholders to the NLRB’s joint employer rule “due to the lack of clarity and consistency regarding the criteria for establishing a joint employment relationship,” said Emily M. Dickens, SHRM chief of staff, head of government affairs, and corporate secretary. She noted that SHRM is concerned with the broad drafting of the rule, which creates a joint employer relationship through indirect or reserved control over a third party by organizations.

We’ve gathered articles on the news from SHRM Online and other outlets.

Veto’s Effect

Biden rejected the resolution brought under the Congressional Review Act that would have blocked the NLRB’s new standard. The new standard lowers the bar for whether two companies are joint employers—employers that share obligations to negotiate with unions as well as joint liability for labor violations.

(Bloomberg)

Biden Supports NLRB Rule

“The NLRB’s rule would prevent companies from evading their bargaining obligations or liability when they control a worker’s working condition—even if they reserve such control or exercise it indirectly through a subcontractor or other intermediary,” Biden said in a message to Congress regarding the veto action. “If multiple companies control the terms and conditions of employment, then the right to organize is rendered futile whenever the workers cannot bargain collectively with each of those employers.”

The joint employer rule has undergone many revisions and both legal and congressional challenges over the last few presidential administrations.

(Nation’s Restaurant News)

Franchisors’ Concerns

Franchisors fear that the rule would fundamentally alter the franchisor-franchisee relationship, forcing franchisors to exert more control over their franchisees and the way in which they treat their workers.

“President Biden claims to be a champion for small businesses, but today he turned his back on franchising, a business model that’s done more to put countless Americans into small business ownership, particularly for traditionally underrepresented minorities, women and veterans,” said Matthew Haller, the International Franchise Association’s CEO, in a statement.

(Restaurant Business)

District Court Decision

A federal district court in Texas blocked the rule on March 8. The court decided that the new joint employer rule is too broad and violates federal labor law. The rule was found to be invalid because it would treat some companies as the employers of contract or franchise workers even when those companies lacked any meaningful control over their working conditions.

The rule “would treat virtually every entity that contracts for 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,” the court wrote.

NLRB Chairman Lauren McFerran said the NLRB was “actively considering next steps” in the case following the ruling. The NLRB is reportedly exploring its options on whether to appeal the ruling to the 5th U.S. Circuit Court of Appeals or re-examine its efforts to expand its joint employer rule. Even under the recent case law standard that applied prior to the now-stricken rule, employers may want to consider the risk that they can still be found to be a joint employer if they exercise substantial direct and immediate control over essential terms and conditions of employment.

(Reuters, Ogletree Deakins, and SHRM Online)