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Congress Must Act to Reverse NLRB Overreach, Allow Franchising to Move Forward | Commentary

By Robert Cresanti Hundreds of small-business owners from across the U.S. will descend on Capitol Hill this week to talk about how decisions made in Washington are impacting their daily lives. All small-business owners are feeling the weight of higher taxes, increased regulations and the continuing implementation of the Affordable Care Act. These burdens are part of a sadly persistent drumbeat of anti-business policies that has made it harder for them to operate and create jobs. The franchising industry has felt the brunt of this onslaught. Now, thankfully, several lawmakers have introduced bipartisan legislation to help franchise small businesses push back against these obstacles to success.  

The Protecting Local Business Opportunity Act, introduced by Sens. Lamar Alexander, R-Tenn., and Johnny Isakson, R-Ga., in the Senate, and Reps. John Kline, R-Minn., and Phil Roe, R-Texas, in the House, will provide franchise businesses much needed certainty in the face of an unrelenting barrage of regulatory action. The bill would reset an imbalance created by the National Labor Relations Board when it released a major decision earlier last month. The NLRB declared Browning-Ferris Industries, a California-based recycling company, to be a “joint employer” with Leadpoint, a staffing services company. This decision ignored more than 50 years of regulatory and legal precedent and retroactively adopted a far broader definition of “joint employer” than had ever been contemplated. The fallout from the decision will not be limited to Browning-Ferris. It will hurt franchise small businesses throughout the U.S., leaving 780,000 franchise businesses and the nearly 9 million jobs they create at risk. That’s why passage of the Protecting Local Business Opportunity Act is so important. It would restore the traditional definition of joint employer by invalidating the NLRB decision and would put in place an appropriate legal standard for determining who is a joint employer. It has long been accepted that franchisees are the sole employers of their workers — for more than 30 years. Franchisees — not franchisors — make all hiring and firing decisions. They set payroll and hours. They manage day-to-day operations of their businesses. Franchise businesses and their franchisors were considered joint employers only when they share “direct and immediate” control over matters governing essential terms and conditions of employment. What the NLRB has proposed is that franchisees should be considered joint employers even when there is potential, unexercised control over employees. That is, of course, ridiculous on its face.  

This amorphous standard has caused confusion and delay for small-business owners across the country. Mara Fortin is a franchisee based in California who is testifying before Congress this week. She owns and operates seven Nothing Bundt Cakes locations throughout the state. She is extremely concerned about the new NLRB decision because of the uncertainty it creates for her and her fellow franchisees. She has said, “I got into this to be my own business owner and to have a say in how my business ran, with the support of a brand. The NLRB really takes the power away from me to run my own business.” She added that she has a simple message for Washington: “Please, let us local business owners run our businesses.”  

Thankfully, Mara’s message is finally getting through to Congress. The International Franchise Association has organized hundreds of meetings between lawmakers and small-business owners this week. As a result, many more members of Congress will learn the real facts and dangers involved in the NLRB decision. The overall health of our economy depends on this education. Franchising is fueling economic growth and job creation, even during our slow economic recovery. The number of franchise establishments is projected to reach 781,931 in 2015, an increase of 1.6 percent. What’s more, more than 247,000 new jobs are expected to be added by franchises this year.  

This is a 2.9 percent increase over last year, equating to 8.8 direct million jobs.  

IFA and its members urge lawmakers to support the bipartisan Protecting Local Business Opportunity Act in order to restore certainty to franchising and protect its contributions to the economy.  

Robert Cresanti is the executive vice president of government relations & public policy for the International Franchise Association.

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