Senate Rejects NLRB Joint Employer Rule as Biden Promises Veto

The Senate approved a measure to block the National Labor Relations Board’s joint employer rule, siding with business groups that argue it would be too costly in another blow to the rule after a federal court recently struck it down.

The Congressional Review Act resolution, which passed in a 50-48 vote Wednesday now heads to President Joe Biden’s desk for an expected veto.

Sen. Joe Manchin (D-W.Va.) and Independent Sens. Kyrsten Sinema (Ariz.) and Angus King (Maine) joined Republicans in rejecting the NLRB rule, which lowers the bar for finding that two companies must share obligations to negotiate with unions as well as joint liability for labor violations.

“The new standard amounts to more regulatory red tape threatening the very existence of small businesses, especially those that follow the franchise model,” Senate Minority Leader Mitch McConnell (R) said on the floor. “This new labor rule would add even bigger headaches and turn small business owners —including many in my home state of Kentucky—into middle managers.”

The rule has faced a two-pronged attack in court and on Capitol Hill since its release last October. A federal judge struck down the regulation in March after a coalition of business groups, including the US Chamber of Commerce, challenged it in Texas federal court.

The CRA’s passage marks another high-profile defeat for the rule as the board navigates its options to keep the regulation alive, including by refusing to acquiesce to the judge’s ruling outside of his district, the Eastern District of Texas.

The International Franchise Association, which represents corporate giants such as McDonald’s Corp., Yum! Brands Inc., and Subway IP LLC, along with dozens of other industry groups have vigorously lobbied to defeat the regulation in Congress.

But despite being a hot-button labor law issue, a recent Bloomberg Law analysis showed that joint employer cases account for a small portion of the NLRB’s enforcement activity. Still, joint employment has been raised in several high-profile cases currently pending at the board.

The agency recently held that Alphabet Inc.’s Google illegally refused to bargain with workers hired through a staffing agency, setting up a court battle over whether the technology giant is a joint employer of the contract workers.

The National Collegiate Athletics Association also faces a labor board case alleging that it, the Pac-12 Conference, and the University of Southern California jointly employ USC football players, and have been failing to treat them as employees. NLRB lawyers are litigating that case under the Trump-era standard rather than the board’s new rule that has yet to take effect.

Many Democrats have framed the Republican and business opposition to the rule as fear mongering, and said the regulation would help workers negotiate for better working conditions. They’ve also often highlighted the American Association of Franchisees & Dealers’ supportfor the NLRB rule.

The CRA allows Congress to reject agency rulemaking through a resolution that clears both chambers by a simple majority.

The joint-employer resolution avoided the 60-vote requirement for most legislation in the Senate and circumvented the majority leader’s ability to block it through its fast-track process. Eight Democrats in the House also backed the measure.

But lawmakers likely won’t overcome Biden’s expected veto, given that the resolution cleared both chambers with less than a two-thirds majority.