National Restaurant Association Statement on the 2023 Joint Employer Final Rule

Washington, D.C. – The National Labor Relations Board today released its final rule defining Joint Employer status. The National Restaurant Association and the Restaurant Law Center (RLC) strongly oppose the definition of Joint Employer outlined in this final rule. Sean Kennedy, executive vice president for Public Affairs at the National Restaurant Association issued the following statement in response:

“Today’s final rule on Joint Employer is a heavy blow to small business restaurant operators. 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.

“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. And franchisees are suddenly having to come to terms with losing their independence in the eyes of the NLRB.  

“This new definition of Joint Employer will create chaos and legal questions across the restaurant industry. 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 Impact of the New Joint Employer Rule on Restaurant Operators

The new Joint Employer standard creates a trap door for companies to be considered a joint employer and expands the scope of what is considered “essential terms and conditions of employment.” This dramatically increases the liability risks of the franchisor-franchisee relationship, as well as service providers and third-party companies.

As a result, a restaurant operator could be jointly liable for violations committed by an entity with which they have a business relationship. This new standard will also create unnecessary challenges for restaurant operators who are trying to understand what qualifies as joint employer status.

The NRLB’s final rule will:

• Share risk among two or more businesses even if there is only “reserved and indirect” control of employment between the two companies.
• Potentially penalize a restaurant operator if she/he works with a third-party contractor (linens cleaner, janitor, plumber, etc.) who receives a labor violation.
• Create massive labor uncertainty and risk management concerns.
• Reduce opportunities for franchisee ownership and independence.

The Association and the RLC submitted extensive comments opposing proposed changes included in the final rule and are considering all options available to restore a workable standard, including litigation.