President-elect Joe Biden on Saturday called for an end to the “grim era of demonization in America” and said he faces a mandate from the American people to get Republicans and Democrats talking again. But what does his defeat of President Donald Trump signal for restaurants, already saddled with arguably the greatest crisis in the industry’s history?
National Restaurant Association CEO Tom Bené isn’t looking that far ahead just yet. In a statement, he said the record-setting turnout of this year’s election (Biden received some 75 million votes, eclipsing President Obama’s record of 69 million in 2018, while Trump earned about 70.7 million) underscores another dilemma. “… now, more than ever, Americans are depending on their elected officials to work together to pass legislation to support the nation’s recovery,” he said.
“So far, 100,000 restaurants of all types have closed across the country, and another 40 percent are unlikely to make it through the winter without additional relief from the federal government,” Bené said. “If just 5 percent of restaurants close their doors between now and the end of the year, at least half a million jobs would be lost. We must all work together to build a plan that puts the country, and our businesses, on the path to recovery.”
The message from Bené is clear—whatever policies might change under a Biden administration might not matter, good or bad, to tens of thousands of restaurants that don’t make it there.
“In the coming days and weeks, there will be many discussions about long-term goals and priorities; however, the short-term needs of the restaurant and foodservice industry—the nation’s second-largest, private sector employer—cannot be overlooked,” he said.
Bené hopes Congress supports proposals that include immediate relief for restaurants and small businesses nationwide.
“Without this assistance, thousands of restaurants will close before a long-term solution can even be considered,” he said.
In late October, Congress took recess without a COVID-19 recovery deal in place. Association EVP of public affairs, Sean Kennedy, said at the time the decision (or lack thereof), left the future of the restaurant industry “a lot more uncertain because Congress has walked away without passing the relief needed to survive the winter.”
“Between now and when Congress returns to Washington after the election, restaurants will close, putting people out of work, damaging local economies, and discouraging the spirit of entrepreneurship that drives the industry,” he said.
The U.S. House of Representatives earlier in the month passed an updated $2.2 trillion HEROES Act that included $120 billion in relief grants for independent restaurants. It was a scaled down version of a $3.4 trillion version introduced and passed in May but never voted on by the Senate. The House is Democrat controlled, while the Senate is Republican majority. This kind of impasse is what Biden referenced Saturday night. Here’s what could be in store for the next stimulus package under a new administration.
“If Congress and the Administration are unable to come together on a large-scale deal that includes the Senate version of the RESTAURANTS Act, then they must focus on the art of the possible,” Kennedy said. “There are options on the table with bipartisan support, which would provide short-term solutions for restaurants most at risk. A second round of Paycheck Protection Program eligibility, expansion of the Employee Retention Tax Credit, and correction of the tax deductibility with PPP loan forgiveness would help restaurants survive until an industry-specific solution can be agreed on. These options should be at the top of the list when Congress returns for the lame duck session.”
In September, 32 states lost restaurant jobs. October’s report showed food and beverage establishments out 2.1 million jobs since February. On the brink of winter, the industry has shed more jobs than any other industry during the pandemic.
Restaurant employment is down 17 percent from pre-virus levels thanks to closures unfolding in record numbers after operators accumulated bills for month, without sufficient revenue to pay them.
The Independent Restaurant Coalition echoed the Association’s sentiment—that Biden’s victory could be a moot point for many. “Neighborhood restaurants and their employees are out of options and Congress is nearly out of time,” the Coalition said in a statement. “The RESTAURANTS Act is the only legislation in Congress that will help protect restaurants during the winter and ensure they can fully reopen and rehire their teams when it is safe to do so."
Yet let’s envision the future with Biden at the helm. Generally, the perception is that many of President Trump’s policies were business friendly. Biden would likely bring a pro-labor platform to the White House.
Law360 said Biden’s ascendance to the presidency could “not only [spell] doom” for many of these Trump policies, but also “puts key tenets of federal labor law that have been in place for more than a half-century on the chopping block.”
In the past four years, Trump’s administration moved the legal needle sharply in employers’ favor, the publication said. That could change swiftly.
Biden has expressed support for the passage of the Protecting the Rights to Organize Act (PRO Act). Cameron Fox, of Paul Hastings LLP, told Law360 this would represent the biggest change in labor law in more than 75 years (if Democrats could pass it).
Overall, Biden ran on a platform that would disrupt labor discussions in myriad ways, including what workers’ advocates perceived to be lax enforcement of workplace safety rules as COVID-19 spread.
Trump rolled back several Obama-era rules and implemented policy priorities that resulted in limited protection for workers. Michael Filoromo, a partner at plaintiffs firm Katz Marshall & Banks LLP, told Law360 a Biden administration “would almost certainly seek to reestablish Obama-era, pro-worker rules while expanding employer liability for unsafe working conditions as the pandemic continues."
Law360 broke down the possibilities in four areas.
The first is the gig economy. A few weeks before the election, Trump’s labor department issued a proposed rule that offered an expansive view of independent contracting under the Fair Labor Standards Act. While not finalized, it promises to shift the current worker classification test to emphasize employer control and worker entrepreneurship. Law360 said, given the timing, “it could be a prime target for the incoming Biden administration and congressional Democrats who may seek to impose a tougher classification standard either through the regulatory process or through legislation.”
The Trump administration’s rule ran counter to the California A.B. 5 law passed in the Golden State last year. It set a stiff legal standard for assessing whether workers in the state were employees or independent contractors. Gig economy companies railed against it and backed a successful ballot measure to overturn it. As Law360 explains, independent contractors generally aren’t protected by wage, discrimination, and other laws that apply to employees.
For some perspective, according to the Bureau of Labor Statistics, about 40 percent of employees (pre-COVID) in restaurants and bars work part time, which is more than twice the proportion for all other industries.
Before the crisis, it took 60–120 hourly team members to staff an Olive Garden, most of whom were part-time workers.
Building on California’s move and in response to the DOL’s proposal, Democrats in Congress introduced expansive legislation during the Trump administration that would codify a version of the ABC test into federal law, Law360 said. It’s a goal Biden supported during his campaign. This would apply to wide swath of employment laws on top of the FLSA.
Law360 predicts legislative efforts will kick into overdrive after Inauguration Day, although it depends on the final makeup of Congress. Two Senate races in Georgia appear headed for a runoff election that could determine which party controls the upper chamber.
Ron Holland, with McDermott Will & Emery LLP, said, “If independent contractors are going to become employees because of the ABC test, you should see a spike in union organizing and you should see a bump in the percentage of organized labor from where we are now.” He added we should expect constitutional challenges to the new laws if they pass.
Second up is the makeup of the National Labor Relations Board. You could argue this is where the biggest impact was felt over the past four years.
Trump’s Republican-majority NLRB erased dozens of Obama-era decisions and initiatives. Among the most critical to restaurants, it issued regulations to rewrite how affiliated businesses are deemed “joint employers” of the same workers under the National Labor Relations Act. It also sought to overturn parts of an Obama-era rule intended to streamline the union election process.
Additionally, Trump’s NLRB proposed a rule to limit unions’ access to worker contract information and would make college teaching assistants ineligible to form unions, Law360 said. Also, decisions to make it easier for employers to limit access to their property and simpler to fire workers for offensive or profane outbursts.
Just on the joint employer note, in September, a federal judge struck down a DOL ruling that narrowed the liability of franchisors.
In January, the DOL issued a four-factor test to determine joint employer status in situations where an employee performs work for one employer that simultaneously benefits another entity or individual: Hires or fires the employee, supervises and controls the employee’s work schedule or conditions of employment to a substantial degree, determines the employee’s rate and method of payment, and maintains the employee’s employment records..
While difficult to imagine the final product, the essential notion is that franchisors could be on the hook for their franchisees’ actions if the Biden administration returns to Obama-era guidelines. For example, the NLRB ruled last December McDonald’s should not be held responsible for the labor practices of its franchisees—a positive result for the fast-food chain in a long-running case filed by 20 workers who claimed to be fired or subject to retaliation for attempts to unionize.
It was an important ruling given the workers sought to hold McDonald’s liable for the treatment of all workers at both corporate and franchise locations, or a so-called joint employer with franchisees. If the NLRB had ruled in favor of the workers, it would have increased McDonald’s liability and potentially opened the door for its 850,000 or so U.S. workers to form a union.
That could all reverse with certain changes under a new board, with suits surfacing often for large franchise organizations.
Early in his term, Law360 said, Biden will have an opportunity to nominate a new NLRB general counsel. They would serve as the agency’s prosecutor and oversee its network of regional offices, as well as handle day-to-day financial and personnel matters. Biden could also tap someone to fill an existing vacancy on the five-person labor board and create a Democratic majority when Trump appointee William Emanuel’s term experience in August of next year.
He has direct ties to the McDonald’s decision. The Fight for $15 called on Emanuel, along with NLRB Chairman John Ring, to recuse themselves from McDonald’s case in August 2018. They accused them of conflicts of interest since their former law firms helped McDonald’s response to nationwide protests organized by the group calling for higher wages. The same was said in January 2020 after Emanuel joined the two-member Republican majority that ordered a law judge to approve a $170,000 settlement between McDonald’s franchisees and workers (in the December case).
"There has been a strong effort under the Trump administration to return federal labor law to what it looked like before the Obama administration had come in and, in many ways, changed labor law in favor of workers," Fox told Law360. "That is a top priority for the Democrats to remedy if they take power. So traditional labor issues will be, I think, top of the list of issues that they want to address quickly."
The idea would be a NLRB that takes a more worker-friendly approach. Fox added the Biden administration’s backing of the PRO Act suggests key tenets of labor law that have been in place in the post-World War III era could come up for revision.
The PRO Act would make it easier for workers to form unions, Law360 said, push against state’s right-to-work laws, outlaw the use of class-action waivers in arbitration agreements, and put a more worker-friendly joint employer test into federal law.
Fox said the Pro Act, if it passes the Senate, would “very quickly usher in a new era that changes the balance … very strongly for unions and worker protections in a way that we've never seen.”
Where labor could be headed next is the pay gap. Law360 said Trump’s policies perceived as employer-friendly led to Democratic states and municipalities becoming more aggressive on addressing workplace issues.
One being pay discrimination. California and New York were among those that made fair pay laws more robust. With Biden at the helm and if Democrats obtained a majority in Senate, Felicia Davis, of Paul Hastings, told Law360 Biden’s administration would seek to strengthen federal fair pay laws, either through new legislation or regulatory actions.
Davis said pay issues are “in the forefront of a lot of people’s minds.”
Vice President-elect Kamala Harris suggested an aggressive pay equity proposal, Davis said, when she sought the nomination. Her stance called for employers to be penalized for not making progress on the issue. “I don't know if she or Biden would attempt to push more legislation if elected, but I certainly would expect that under a Biden administration, pay equity would again become a focus of the federal agencies as well," Davis told Law360.
Lastly, Law360 believes another late Trump move could signal a quick rebuke from Biden. Trump issued an executive order to ban federal contractors from conducting certain types of diversity training he deemed to be “anti-American.”
Issued September 22, it said federal contractors couldn’t conduct any workplace training that "inculcates in its employees any form of race or sex stereotyping or any form of race or sex scapegoating," such as trainings that present views that "an individual, by virtue of his or her race or sex, is inherently racist, sexist or oppressive, whether consciously or unconsciously."
The DOL’s Office of Federal Contract Compliance Programs was tasked with enforcing the mandate. It asked contractors in October for information about diversity training programs that could run reverse to Trump’s order. Law360 said business groups urged the Trump administration to roll back the executive order, saying restrictions were unclear and could sow confusion into what diversity programs contractors are allowed to implement. Biden, however, might see the order as something he could discard.
“It wouldn't surprise me if that was withdrawn minute one by a Biden administration,” Holland told Law360.
No matter how you look at all of this, it’s going to be an eventful few months. Something else for restaurants to consider as they grapple with the weight of a global pandemic and the dining room restrictions that follow.
One positive turn was Monday’s announcement from drug company Pfizer that said early COVID vaccine tests have been 90 percent effective. Stocks soared in response, especially on the full-service side.
Some other things to note:
On Biden’s “Build Back Better” transition website, launched Sunday, he said there would be a Main Street restart recovery package designed to cover costs of operating during COVID, such as PPE. He also reiterated a plan to raise the nationwide minimum wage to $15 an hour and end tipped minimum wages and sub-minimum wages for people with disabilities.
He also outlined a proposal that backed up Law360’s predications by saying he’d pass the PRO Act and shared a Paycheck Fairness Act to ensure women receive equal pay for equal work. Another suggested work change would extend COVID-era crisis insurance for unemployed workers and universal paid sick days and 12 weeks of family and medical leave per year.