AHLA sues U.S. Biden Administration over franchise-model destroying rule

Monday, November 13, 2023



In a joint effort, the American Hotel & Lodging Association (AHLA), the U.S. Chamber of Commerce, and other plaintiffs have filed a lawsuit challenging the legality of the National Labor Relations Board’s (NLRB) new “joint-employer” regulation.

Filed in the U.S. District Court for the Eastern District of Texas, the suit argues that the NLRB has violated the National Labor Relations Act and acted arbitrarily and capriciously, breaching the Administrative Procedure Act.

The NLRB introduced a new joint-employer standard on October 26, compelling hotel brands to engage in collective bargaining with franchised employees over whom they have no direct authority. The existing standard considers a company a joint employer only if it exercises “substantial direct and immediate control” over a group of employees. However, the NLRB’s new regulation, set to take effect on December 26, allows a company to be treated as a joint employer and obligated to engage in collective bargaining, even in the absence of actual control over workers.

This regulatory shift means that hotel franchisors will be jointly responsible for workplace matters at franchise locations, even when they have no practical control over franchise employees. The consequence is the imposition of unions on hotel franchisees and their employees.

AHLA President & CEO Chip Rogers expressed concerns about the NLRB’s joint-employer regulation, stating that it is designed to coerce businesses into bargaining with workers they do not directly employ, ultimately increasing unionization.

Rogers emphasised the potential negative impact on the franchise model, a vital economic engine, and small businesses that rely on it.

The lawsuit aims to restore the rule of law that has governed joint-employment designation for nearly four decades and prevent the potential dismantling of the franchise business model, which has been a source of prosperity for thousands of American small business hoteliers.

The legal challenge seeks to address the implications of the new regulation on businesses and protect the existing economic structure that supports small enterprises in the hotel industry.

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