Retailers oppose new joint employer rule; call it ‘harmful’ to retail employers

The nation’s major retail and resturant groups are calling out the National Labor Relations Board’s expansion of the joint employer rule. 

The expanded rule, which takes effect on Dec. 26, treats companies as so-called "joint employers" when they have control, even if it not direct or  exercised, over essential terms and conditions of employment such as pay, scheduling, hiring and firing. It makes it easier for workers and labor unions to hold companies liable for labor law violations by their franchisees and contractors. 

In a statement Sean Kennedy, executive VP for Public Affairs at the National Restaurant Association, noted that 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,” Kennedy added. “And franchisees are suddenly having to come to terms with losing their independence in the eyes of the NLRB.”

Kenneday said the new rule, among other things, will  potentially penalize a restaurant operator if she/he works with a third-party contractor (linens cleaner, janitor, plumber, etc.) who receives a labor violation.

“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,” he said.

“The new NLRB joint employer rule is vague, unworkable and increases risks to businesses who operate dynamic, complex supply chains that rely on numerous business-to-business interactions,” stated Evan Armostrong, VP, workforce, Retail Industry Leaders Association.  “This will ultimately lead to more litigation and less efficient retail supply chains.

 David French, senior VP of government relations, National Retail Federation, said the new rules will have a detrimental impact on the retail community “as it creates ambiguity within the employer-employee relationship, inhibiting both job growth and free enterprise.”

 “Retailers need a definitive line regarding joint employment, because they regularly contract with third-party businesses to provide a variety of services in areas involving their distribution centers, shipping and facilities maintenance and others,” French added. “The partnerships between retailers and these specialty service providers are vital to the industry’s success. Simply put, the new standard is unclear, unnecessary and harmful to thousands of retail employers and the millions of Americans they employ.”

NRF submitted a comment letter in December 2022 formally opposing the proposed rules and urging the Board to retain the existing, workable standard.