October 26, 2023

Manchin, Cassidy Lead Effort to Overturn Biden Administration Rule Threatening American Franchise Model, Small Business

Washington, DC – Today, U.S. Senators Joe Manchin (D-WV) and Bill Cassidy, M.D. (R-LA), ranking member of the Senate Health, Education, Labor, and Pensions (HELP) Committee, announced they will introduce a Congressional Review Act (CRA) resolution to overturn the National Labor Relations Board’s (NLRB) new joint employer rule, which forces liability on companies for another business’ employees even if they do not directly oversee them. The NLRB released the final joint employer rule earlier today.

“The National Labor Relations Board’s final rule on the joint employer standard is just another example of the vast overreach from unelected and out-of-touch bureaucrats that imposes additional and unnecessary regulations that threaten our economy. Ultimately, with this new final rule, the Board has decided to harm thousands of small businesses, their employees, and the surrounding communities. As soon as we can, I will be introducing a bipartisan CRA with Senate Health, Education, Labor and Pensions Committee Ranking Member Cassidy to block this harmful rule. Instead of wreaking havoc on the franchise business model, we must enact commonsense, bipartisan policies that empower small businesses to do what they do best: create jobs, present new opportunities for workers and their families, and help our economy thrive,” said Senator Manchin.

“Saddling franchisers with liability for thousands of franchise owners that actually operate the day-to-day activities of small business would be a sure way to destroy the system of franchising. This model has empowered those underrepresented in the business community, such as women and people of color, to live the American dream, becoming successful small business owners as they help create jobs lifting other workers out of poverty,” said Dr. Cassidy. “The priority of the Biden administration should be to support workers and foster economic opportunity, not to do whatever makes it easier to forcibly and coercively unionize workers while undermining the business model of the establishments they work for.” 

The new rule saddles franchisers with the liability of individual franchise owners despite having no operational control over the business’s employees. This threatens the viability of the franchise business model, a system that employs over eight million workers and has empowered Americans from all communities to become successful business owners. Additionally, the rule creates uncertainty among small and local businesses on their legal liabilities, leading to higher operational costs and less opportunity to create jobs.

For more than a quarter century, it was an established legal precedent that a company could only be considered a joint employer if they have “direct and immediate” control over another business’s employees. This changed in 2015 under the Obama administration, which forced companies to be liable for another business’ employees if they held “indirect” and “reserved” control over their workers. In 2020, the Trump administration returned to the longstanding “direct and immediate” standard, providing legal stability to businesses.