The U.S. House of Representatives voted to repeal the federal labor board’s joint employer legislation on Friday, which would treat companies as employers of contract and franchise workers and make it mandatory for them to bargain with workers’ unions. The rule was supposed to take effect in February.
The House voted 206-177 to overturn the National Labor Relations Board’s rule, according to a Reuters report. In the next step, this Congressional Review Act resolution will go to the Senate floor for a vote.
Earlier this week, the White House said President Biden would veto the resolution if it passed both houses of Congress. A two-thirds majority will be needed to overcome a White House veto.
The regulation, which revives a President Obama-era rule, has been severely criticized by business groups. Welcoming this move, the American Hotel & Lodging Association (AHLA) said the House vote was a “victory for common sense.”
Claiming that the regulation will destroy the franchise model, which supports millions of small-business jobs, AHLA President and CEO Chip Rogers said neither companies nor their employees wanted the “job-killing” regulation.
“The bipartisan nature of this vote underscores how destructive this misguided Biden Administration rule would be to our fragile economy, and we thank Dr. Foxx, Rep. James, and Speaker Johnson for making this a priority. We urge the Senate to stand up for America’s workers and pass this resolution as soon as soon as possible,” Rogers said in a statement.
In October 2023, the labor board issued a final labor rule expanding the definition of “joint employer,” making companies and their franchisees liable for labor terms and conditions like union contracts, pay, scheduling, hiring and firing.
According to the regulation, a company found to be a joint employer might have to become more involved in establishing and enforcing workplace policies and negotiating with unions.
The law would be “devastating” to the hotel industry and millions of people employed, AHLA had argued, adding that it was a “partisan gambit to force unions on hotel franchisees and their employees” and several other small businesses and workers in the U.S.”
Companies and franchisors will have to tread lightly when it comes to oversight of another entity’s workers, Dana Kravetz, firm managing director, Michelman & Robinson, told HOTELS.
“We’ve seen this before. Once again, joint employer liability can be triggered in the wake of direct or indirect control of third-party employees — say, valet parkers, which are outsourced — or even the unexercised ability to exert control. This means that hoteliers, and franchisors in particular, should be intently focused on brand standards but careful not to weigh in on operational issues of third parties, especially those involving workers obtained from staffing firms, vendors and other business-to-business arrangements. Doing so can prove to be costly,” Kravetz said.
While fully supporting the right to form a union and bargain with employers, AHLA said it opposed the new regulation, which lays down a new standard establishing indirect or unexercised control as sufficient to trigger joint employer status. The “subjective definition” will result in predisposed outcomes irrespective of facts and circumstances.
In November, AHLA sued the Biden administration over the new rule. The association joined hands with the U.S. Chamber of Commerce and other plaintiffs and filed a lawsuit challenging the legality of the regulation.
AHLA and the plaintiffs claimed that the NLRB had breached the National Labor Relations Act and was “acting arbitrarily and capriciously” in violation of the Administrative Procedure Act.
The lawsuit sought to reestablish the rule of law that has governed joint-employment designation for almost four decades to prevent the destruction of the franchise business model that has provided prosperity for thousands of American small business hoteliers, Rogers said.
“The NLRB’s joint-employer regulation is all about coercing businesses to the bargaining table with workers they do not actually employ to increase unionization. To achieve this, the NLRB is intentionally taking a wrecking ball to one of America’s great economic engines – the franchise model – and jeopardizing millions of small-business jobs,” Rogers added.