The restaurant industry is bracing for impact following the National Labor Relations Board's (NLRB) release of its final rule on the definition of a Joint Employer. A new rule proposed by the National Labor Relations Board would increase employer liability, according to the National Restaurant Association. The National Restaurant Association and the Restaurant Law Center (RLC) have come forward in strong opposition to this newly minted regulation, raising concerns about its impact on both franchisors and franchisees within the industry, according to a press release from the organization.
"Today’s final rule on Joint Employer is a heavy blow to small business restaurant operators," said Sean Kennedy, executive vice president for Public Affairs at the National Restaurant Association. According to the press release, the new rule introduces a nebulous definition of 'employer,' focusing on 'indirect or potential influence' over an employee, without providing further clarification on what 'indirect control' means in the context of a joint employer relationship.
Kennedy also stressed that "nearly one-third of the restaurant industry operates under a franchisee-franchisor relationship," highlighting the widespread implications of this rule. The NLRB's final regulation potentially puts every restaurant operator in a position of having to reevaluate their liabilities for all individuals working in their establishments.
As stated in the press release, the rule dramatically increases the liability risks inherent in the franchisor-franchisee relationship. It goes on to elaborate that a restaurant operator could now be held jointly liable for violations committed by a third party, such as a linen cleaner, janitor, or plumber, with whom they have a business relationship.
"This new definition of Joint Employer will create chaos and legal questions across the restaurant industry," warned Kennedy. "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."
The rule introduces a "trap door" for companies to be considered a joint employer by extending what counts as "essential terms and conditions of employment." According to the press release, this could result in reduced opportunities for franchisee ownership and independence, as well as massive labor uncertainty and risk management concerns.
The National Restaurant Association and the RLC expressed that they are considering all options to combat the final rule, including potential litigation, according to the NRA press release.
