AHLA sues Biden Administration over franchise-model destroying rule

Joint-Employer Final Rule

WASHINGTON (Nov. 9, 2023) – Today, the American Hotel & Lodging Association (AHLA), the U.S. Chamber of Commerce, and other plaintiffs filed a lawsuit in the U.S. District Court for the Eastern District of Texas challenging the legality of the National Labor Relations Board’s (NLRB) new “joint-employer” regulation.

The suit contends the NLRB has violated the National Labor Relations Act and is acting arbitrarily and capriciously in violation of the Administrative Procedure Act.

The NLRB issued a new joint-employer standard Oct. 26 that will force hotel brands to the collective bargaining table with franchised employees over which they have no authority.

Currently, a company can be treated as a joint employer only if it has “substantial direct and immediate control” over a group of employees. Under the NLRB’s new regulation, which will take effect Dec. 26, a company can be treated as a joint employer and forced to collectively bargain, even when it has no actual control over workers.

This change will make hotel franchisors jointly liable for workplace matters at franchise locations even though franchisors have no control over franchise employees, and it will force unions on hotel franchisees and their employees.

“The NLRB’s joint-employer regulation is all about coercing businesses to the bargaining table with workers they do not actually employ to increase unionization. To achieve this, the NLRB is intentionally taking a wrecking ball to one of America’s great economic engines – the franchise model – and jeopardizing millions of small-business jobs,” said AHLA President & CEO Chip Rogers. “The goal of this lawsuit is to reestablish the rule of law that has governed joint-employment designation for nearly four decades. It will also prevent the destruction of the franchise business model that has provided prosperity for tens of thousands of American small business hoteliers.”

The full complaint can be viewed here.

For decades, an employer was only a joint employer if it maintained “substantial direct and immediate control” over workers’ terms and conditions of employment. Employers and employees came to depend on this definition, and courts rejected myriad attempts to insert a more subjective legal standard to obligate third parties to collectively bargain.

AHLA fully supports the right to form a union and collectively bargain with employers that have direct and immediate control over workers’ terms and conditions. AHLA does not, however, support the NLRB’s new rule, which codifies a new standard that establishes indirect or unexercised control as sufficient to trigger joint employer status. This subjective definition will create predisposed outcomes irrespective of genuine facts and circumstances.