WASHINGTON – Though this fractured Congress hasn’t been able to agree on much, a bipartisan group of senators was able to band together Wednesday night to narrowly rescind a new regulation that would have made organizing labor easier among the 9 million U.S. workers employed by more than 800,000 franchises.
The Senate voted 50-48 to give final passage of a House-passed resolution in an effort led by U.S. Sen. Bill Cassidy, R-Baton Rouge.
Because of internal Republican Party disputes in an atmosphere of harsh partisan rancor, the 218th Congress, according to numerous organizations that track such things, has passed fewer bills than nearly any other Congress in history.
But enough of the factions in the House and Senate overcame their mutual enmity to take a joint swipe at President Joe Biden’s pro-labor efforts.
The legislation now goes to the White House for Biden’s signature into law. Many observers predict the president will veto the measure, though Biden has not said.
Sen. Joe Manchin III, a West Virginia Democrat, said, “I encourage President Biden to accept this bipartisan rejection of his overreaching and irresponsible policy.”
Biden’s new joint employer rule forces legal liability onto franchise companies – such as McDonald's or Burger King – for the labor decisions of the individual franchisees, even though the national company has no operational authority over the local business’s employees.
“It’s easier for unions when they have to negotiate with one major entity rather than with each individual small business,” said Cassidy in arguing against the Biden rule. “This allows the union to wield more influence in the collective bargaining process.”
Cassidy argued prior to the Senate vote: “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.”
Cassidy noted that many local franchise businesses are owned by women and people of color, who rely on their association with the national companies to operate and grow their small operations.
As the highest-ranking Republican on the Senate Health, Education, Labor, and Pensions Committee, Cassidy sponsored the Senate version of the resolution with Manchin and Minority Leader Mitch McConnell, R-Kentucky.
The House version, which passed the Senate Wednesday night, was approved on a 206-177 vote in January.
Franchise owners sell their brand and protocols to individual local businesses that benefit from shared advertising and a national identity. While providing equipment and requirements that the product be made and presented for sale under specific guidelines, the local owners, called franchisees, are responsible for hiring employees and running their businesses day to day.
Cassidy and others argue that the October 2023 National Labor Relations Board final rule unfairly put the national company on the hook, and liable in lawsuits, for decisions made by the local franchisee, including union contracts, scheduling, pay, and other workplace practices.
President Barack Obama's administration in 2015 overturned a policy in place for a quarter century that allowed legal liability for the franchise company only when it had “direct and immediate” management over another business’ employees. The new policy allowed liability if the national franchise company held “indirect” and “reserved” management over the local franchisee’s workers. Its reasoning was that local franchisee employees have little say over workplace conditions. Many employees work for low wages on schedules of less than 40 hours per week to allow owners to avoid paying for healthcare and retirement benefits.
Under President Donald Trump's administration, this regulation was rescinded in 2020. The Biden administration rule returned the situation closer to what Obama had put in place.
Sen. Mike Braun, R-Indiana, said the situation has caused confusion for franchises, which account for 32% of the nation’s small businesses.
Louisiana is home to about 12,000 franchise businesses.
New Orleans-based Bill DiPaola, an immigrant, operates Swamp Dawg Restaurant Management Group LLC, whose franchised restaurants include national brands, such as, Zaxby’s, Mooyah, Eggs Up Grill, Mellow Mushroom, Shuckin’ Shack Oyster Bar, and Locos Catering.
“My family didn’t emigrate from Guatemala to the U.S. so that we could have the freedoms we fought so hard to earn taken away from us by those that didn’t have to live in their car just to survive, let alone be the business owners we are today,” DiPaola said in a statement after the vote. “The joint employer rule out of Washington is unconscionable because it would force franchise businesses to take control of their franchisees like me.”