New rule could be huge for millions of franchise and contract workers

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Millions of workers at some of the biggest U.S. employers could gain sweeping new rights under a new federal labor rule set to take effect by year-end.

The final rule, announced Thursday by the National Labor Relations Board, would classify companies such as franchisees and contractors as an employer if they control basic conditions of work such as pay, scheduling and supervision. In a stroke, that would make fast-food giants, retailers, technology players, staffing firms and many other businesses that hire workers on a contract basis more accountable for violations of labor law, one expert told CBS MoneyWatch.

“The new rule is enormously important and could bolster the rights of millions of employees,” John Logan, chair of labor and employment studies at San Francisco State University, told CBS MoneyWatch. 

The so-called joint employer rule replaces one enacted during the Trump administration that required companies to have “direct and immediate” control over contract and franchise workers to be considered joint employers. Labor advocates contend the present standard gave companies an escape route for violations of labor law.

“Under the previous standard, it was too easy for corporations to claim they weren’t responsible for violations of workers’ rights and almost impossible to hold accountable,” Logan said. 

Companies that are classified as joint employers under the new rule could now be made to take part in collective bargaining, for instance. 

Industry pushback

NLRB Chair Lauren McFerran said the board took “a legally correct return to common-law principles” in crafting the rule, which takes effect on December 26.

The regulation is opposed by the U.S. Chamber of Commerce and the National Retail Association (NRA), with both indicating that they could challenge the rule in court. 

“It defies common sense to say that businesses can be held liable for workers they don’t employ at workplaces they don’t own or control, yet that is exactly what the new NLRB joint-employer rule does,” Glenn Spencer, the group’s senior vice president for the employment division, said in a statement. “This rule will create chaos and more legal confusion that will harm both employers and workers. The U.S. Chamber will carefully evaluate our options going forward, including litigation.”

The NRA reiterated its opposition to the new standard, calling it “unclear, unnecessary and harmful to thousands of retail employers and the millions of Americans they employ.”

American Hotel & Lodging Association President & CEO Chip Rogers called the LNRB’s new rule “devastating to the hotel industry and the millions of people we employ,” and accused the agency of trying to dismantle the franchise business model to “artificially increase unionization.”

Sens. Joe Manchin, D.-W. Va. and Bill Cassidy, R.-La., say they’ll introduce a resolution to overturn the rule, Politico reported

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