Behind every small business is a story of entrepreneurial vision and risk taking. All startups are a daunting endeavor. That’s why the franchising model was created — to help launch new businesses, leveraging resources from successful nationally recognized companies to individual operations.It’s a model that has worked well for decades — franchisors grow and expand their brand-reach while franchisees realize the dream of starting their own business.
In the restaurant industry, ninety percent of America’s restaurants are either independent operators or franchisees. Overall, franchisees are responsible for the majority of restaurant industry job growth and continue to be an engine of economic advancement for the nation.
Unfortunately, increasing and overreaching regulations from the National Labor Relations Board have been eroding the franchising relationship and endangering the success of our small businesses. Our congressional leaders should keep a watchful eye over these developments.
Just this week, the NLRB overturned a thirty-year rule that gave franchisees the freedom to run their day-to-day employment practices independently of their franchisor — hiring, shift schedules, terminations. A traditional firewall has now been eliminated, making franchisors liable for franchisees’ employment practices despite the fact that franchisors have no control over those practices. It is a dangerous path that dissolves the long-established “joint-employer standard” that has helped create millions of restaurant jobs through the franchisor/franchisee model.
The ruling defies precedent and common sense. Just this month, a federal appeals court ruled that a Texas franchisor was not liable as an employer under the Fair Labor Standards Act because he lacked the authority to hire and fire, didn’t set work schedules, and didn’t establish pay rates and methods.
NLRB’s disruption of the joint-employer standard is a response to efforts by organized labor to build additional ways to unionize restaurant workers. Labor would much rather take a bigger swipe at organizing a large corporation than pick off small businesses with a handful of employees one at a time. By tying franchisees more to the hip of their parent company, labor can redefine a “small business” as “big business” and go after parent companies in their organizing efforts. Furthermore, as written, the recent NLRB decision negatively impacts other industries, like contracted janitorial and landscaping services.
The steps the NLRB is taking will have dire consequences to franchisees, franchise employees and the economy as a whole. With increased challenges to franchise there will be fewer jobs created, less capital invested into the economy, fewer taxes paid and less upstream and downstream economic activity. One bright spot is that Congress is attuned to these happenings and the House Subcommittee on Health, Employment Labor & Pensions has held a hearing and continues to monitor developments.
Unfortunately, the NLRB’s changes to the joint-employer standard are just the latest example of a federal agenda aligned against small businesses. A look at the NLRB and Department of Labor under the Obama administration finds multiple appointments of officials who do not respect the contributions of small businesses and independent entrepreneurs to the U.S. economy. In fact, the Supreme Court just ruled that President Barack Obama overstepped presidential authority with his quick recess appointments of three union-backed officials to the NLRB, a board that has issued hundreds of new rules favoring union initiatives.
Sen. Jeff Flake, R-Ariz., takes a selfie with his cut-out head during the Hoops for Youth 16th annual charity basketball game held at George Washington University's Smith Center, September 8, 2014. The members of Congress team beat the lobbyist team 46-40. Buy photo here.