President Joe Biden vetoed a bill that would have ended an effort to make franchisors jointly liable for their franchisees’ workforces, effectively killing a Congressional effort to beat back a regulatory push that has dogged the franchise industry for years.
In vetoing the legislation, Biden said he did so to protect the right for workers to “organize and bargain collectively.”
“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,” Biden wrote in a message to the U.S. House of Representatives, in explaining the veto.
The legislation, H.J.Res. 98, would have ended the National Labor Relations Board’s effort to expand the definition of joint employer. In short, the broader definition would make franchisors liable for the actions of their franchisees’ employees, exposing them to the same penalties and litigation as the franchisees.
Franchisors fear that this will pave the way for unions to organize a franchise’s entire workforce.
They also worry that it would fundamentally alter the franchisor-franchisee relationship, by forcing franchisors to exert more control over their franchisees and the way in which they treat their workers. Franchisees traditionally own their restaurants or other businesses and have been responsible for their workers.
Small business groups were quick to hit back at the White House.
“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,” Matthew Haller, IFA’s CEO, said in a statement. “The Administration has solidified its position that it cares more about special interests than small business owners and employees, who face a near-daily onslaught of costs and uncertainties from the Biden Administration’s regulatory assault.”
Biden in his letter said that, without the NLRB’s rule, “companies could more easily avoid liability simply by manipulating their corporate structure.” Labor groups have argued that franchisors exert enough control over their franchisees that they should be jointly liable.
The joint employer issue has bounced around for years, depending largely on the party occupying the White House. But the NLRB has sought to expand the definition of joint employer for years. Since Biden’s election, the agency has worked to expand the definition. The legislation would have scuttled the agency’s effort, and passed both the House and the Senate.
Congress can overturn the president's veto. Yet the Senate passed the measure on a 50-48 vote, not nearly enough for the two-thirds vote required to reverse Biden's decision. That likely leaves the matter up to the courts, and indeed at least one federal judge has blocked the rules’ adoption.
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