National Restaurant Associaton and AHLA Release Statements on Joint Employer Final Rule

The National Restaurant Association (NRA) and American Hotel and Lodging Association (AHLA) each released statements concerning the final rule of the Joint Employer status. The National Labor Relations Board released this final rule on October 26, 2023, an addition to the “Joint Employer Status Under the National Labor Relations Act.” The final rule establishes that, under the National Labor Relations Act, two or more entities may be considered joint employers of a group of employees if each entity has an employment relationship with the employees, and if the entities share or codetermine one or more of the employees’ essential terms and conditions of employment.

Both the NRA and AHLA released a statement regarding this final rule the day it was passed, condemning the standard’s expansion. The AHLA wrote:

“AHLA President & CEO Chip Rogers is speaking out today after the National Labor Relations Board issued a final regulation unjustifiably expanding the “jointemployer standard” under the National Labor Relations Act. The standard is used to determine when two or more employers are jointly responsible for a shared group of workers’ essential terms and conditions of employment and thus jointly liable for violations of the National Labor Relations Act and have joint bargaining responsibilities for unionized employees. The NLRB’s expansion, effective Dec. 26, 2023, will impact business-to-business relationships in a manner that will limit opportunities for small businesses and entrepreneurs and threaten the franchising model.

‘NLRB’s actions today are devastating to the hotel industry and the millions of people we employ. This is a partisan gambit to force unions on hotel franchisees and their employees as well as countless other small businesses and workers across the country,’ said AHLA President & CEO Chip Rogers. ‘NLRB’s goal is to coerce businesses to the bargaining table with workers they do not actually employ to artificially increase unionization. This dramatic shift will effectively dismantle the franchise business model – the single greatest avenue to successful entrepreneurship in American history and a system that has helped our industry build millions of well-paying jobs and careers. AHLA is reviewing opportunities to legally challenge this regulation to restore certainty for America’s lodging industry.’”

Similarly, the NRA wrote:

The National Labor Relations Board today released its final rule defining Joint Employer status. The National Restaurant Association and the Restaurant Law Center (RLC) strongly oppose the definition of Joint Employer outlined in this final rule. Sean Kennedy, executive vice president for Public Affairs at the National Restaurant Association issued the following statement in response:

‘Today’s final rule on Joint Employer is a heavy blow to small business restaurant operators. The rule upends employment policy, adopting a far-fetched definition of ‘employer’ based on ‘indirect or potential influence’ of an employee and then fails to define how ‘indirect control’ will count toward a joint employer relationship.

‘Nearly one-third of the restaurant industry operates under a franchisee-franchisor relationship and nearly all restaurants contract third parties for work like laundry or delivery. This means nearly every restaurant operator is now on a crash course to figuring out if they have a joint liability for the host of people working in their establishment. And franchisees are suddenly having to come to terms with losing their independence in the eyes of the NLRB.

‘This new definition of Joint Employer will create chaos and legal questions across the restaurant industry. The National Restaurant Association and the Restaurant Law Center will work to help franchisors and franchisees understand their responsibilities while we fight to restore a workable joint employer standard based on the direct and immediate control of their employees.’”

Both associations consider the new joint employer standard to create a trap for companies to be considered a joint employer as it expands the scope of what is considered essential terms and conditions of employment.

National Restaurant Association and the Restaurant Law Center will work to help franchisors and franchisees understand their responsibilities while we fight to restore a workable joint employer standard based on the direct and immediate control of their employees.’

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.

As a result, 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.

The Association and the RLC submitted extensive comments opposing proposed changes included in the final rule and are considering all options available to restore a workable standard, including litigation."