National Restaurant Association Statement on House Passage of Joint Employer CRA

Washington, D.C. – Sean Kennedy, executive vice president for Public Affairs at the National Restaurant Association issued the following statement on the House vote on the H.J. Res. 98, the Congressional Review Act regarding the National Labor Relations Board's (NLRB) final rule, “Standard for Determining Joint Employer Status”:

“Congress doesn’t agree on much these days, but today’s bipartisan vote makes clear there is support for overturning the National Labor Relation Board’s overreaching Joint Employer Rule. We appreciate the House taking the first step in this process and we hope that the Senate will follow.

“The NLRB’s latest Joint Employer Rule threatens the foundation upon which nearly a third of the restaurant industry is built by significantly expanding its scope to an unprecedented degree. The traditional rule has been a fundamental basis for growth and stability in the restaurant industry, especially in opening doors for people to become business owners through restaurant franchising.

“Restaurants are the cornerstone of the American economy and a vital source of employment. Should the new rule go into effect, there will be profound and far-reaching repercussions across the industry. This rule risks imposing onerous regulatory burdens and increased legal liabilities on restaurants large and small that could limit entrepreneurship and dampen economic growth in communities across the country.”

The Impact of the New Joint Employer Rule on Restaurant Operators

The new Joint Employer standard creates a trap door for companies to be considered a joint employer and expands the scope of what is considered “essential terms and conditions of employment.” This dramatically increases the liability risks of the franchisor-franchisee relationship, as well as service providers and third-party companies.

Under the new rule, a restaurant operator could be jointly liable for violations committed by an entity with which they have a business relationship. This new standard will also create unnecessary challenges for restaurant operators who are trying to understand what qualifies as joint employer status.

The NRLB’s final rule will:

• Share risk among two or more businesses even if there is only “reserved and indirect” control of employment between the two companies.
• Potentially penalize a restaurant operator if she/he works with a third-party contractor (linens cleaner, janitor, plumber, etc.) who receives a labor violation.
• Create massive labor uncertainty and risk management concerns.
• Reduce opportunities for franchisee ownership and independence.