In light of a recent lawsuit, the National Labor Relations Board is giving operators more time to prepare for a stringent joint employer rule that would make it easier for franchisors to be held liable for worker violations at the franchisee level.

The governing body announced that it would extend the effective date of its new rule to February 26 to “facilitate resolution of legal challenges with respect to the rule.” Previously, the start time was December 26.

According to the new rule, a franchisor and franchisee may be considered joint employers if they both have an employment relationship with workers and they share or codetermine “essential terms and conditions of employment.” A franchisor may be considered a joint employer if it has the authority to control at least one of these essential terms and conditions. It wouldn’t matter if the control is exercised or not or if the control is direct or indirect. 

In response, a group of restaurant representatives filed a lawsuit asking a court to declare the rule unlawful and to prevent the NLRB from enforcing it. The lawsuit claimed the new rule makes the joint employer definition too broad and that it “threatens billions of dollars in liability and costs.” The organizations prefer the 2020 Trump era rule in which an entity must have “substantial direct and immediate control” over essential terms and conditions of employment to be considered a joint employer. The filing stated that this new change “threatens chaos and indeterminacy in national labor relations across major industry sectors.”

The parties associated with the filing are the International Franchise Association, U.S. Chamber of Commerce, American Hotel and Lodging Association, Associated Builders and Contractors, Associated General Contractors of America, Coalition for a Democratic Workplace, Longview Chamber of Commerce, National Retail Federation, National Association of Convenience Stores, Restaurant Law Center, Texas Association of Business, and Texas Restaurant Association.

“Delaying implementation of this rule is an acknowledgement of what we have been saying all along: this proposal is unworkable and congressional action to kill it once and for all remains paramount,” Matt Haller, CEO of the International Franchise Association, said in a statement. “We are grateful for the bipartisan support the Congressional Review Act (CRA) has received so far and will continue educating lawmakers on the importance of joining our growing coalition of supporters. New regulations that will cost jobs, shutter small businesses and increase litigation on a thriving business model are not the solutions our country needs.”

Franchising, Legal, Story