July 29, 2014: That’s the day the National Labor Relations Board (NLRB) escalated its attack on America’s small businesses and the workers they employ.
That’s right, two years ago today, NLRB General Counsel Richard Griffin determined McDonald’s Inc. and certain franchisees were “joint employers.” His unprecedented decision would advance a broader effort to overturn decades of settled labor policies and, more importantly, threaten to upend a business model that has helped countless men and women achieve the American dream.
House Education and the Workforce Committee Chairman Kline described Griffin’s decision as “detached from reality.” The Wall Street Journaleditorial board agreed:
Making franchisers joint-employers deep-fries the incentives to franchise. Why would entrepreneurs assume a 100% equity stake in a business that they only partially control? Why would a corporation franchise if the legal liabilities and responsibilities are the same as owning? … [T]housands of franchisers and franchisees have been put on notice that their business model is no longer legal.
It’s not just franchise small businesses that are in the crosshairs. The NLRB is jeopardizing countless other small businesses, subcontractors, and suppliers nationwide. Of course, Big Labor celebrated a move that will make it easier to organize workers. But many small business owners warned the life they worked hard to build for themselves and their employees would drastically change:
“That can only mean one thing for me: less freedom and less autonomy to run my business as I see fit – a business that I purchased with my savings in order to provide opportunity and security for my family. Our family business will no longer be ours.” – Gerald Moore, franchise owner, Little Gym, Knoxville, TN
“I cannot imagine what I would do if I were stripped of my independence because a different business owner, hundreds of miles away, is facing a lawsuit that has nothing to do with me.” – Clint Ehlers, president, FASTSIGNS franchise, Lancaster, PA and Willow Grove, PA
“To be completely honest, if these were the conditions of the franchising model before I became an hotelier, I would have never entered into this business.” – Jagruti Panwala, hotel owner and operator, Ivyland, PA
“I believe that unelected government officials are inventing a new definition of ‘joint employer’ that may threaten the livelihoods of local business owners like me.” – John Sims, owner and operator, Rainbow Station at the Boulders, Richmond, VA
“Instead of being a small businessman, I would virtually overnight become a manager for a large company … I now find myself in the position that an unelected Board in Washington, DC can just unilaterally determine that my American dream is over.” – Chris Holmes, CEO, CLH Development Holdings, Inc., Tallahassee, FL
“As a franchisee, I will be no more than a glorified manager in my own restaurant … The years of labor and hundreds of thousands of dollars I have invested in my business will result in nothing more than an income and an employer manual.” – Alex Salgueiro, CEO, Savannah Restaurants Corporation, Savannah, GA
These concerns fell on deaf ears. The board soon followed Griffin’s lead and issued a partisan decision discarding the well-established joint-employer standard and ruling employers could be held legally responsible for workers they do not employ and personnel decisions they do not make. The NLRB’s redefinition of what it means to be an employer was exactly what Griffin and union bosses wanted. And it was what many small business owners feared, and now they are starting to face the consequences:
“It’s clear to see just how this broad and ambiguous new standard increases the cost of doing business. It makes it more difficult for companies like mine to continue to do all of the great work we do within the community and provide well-paying jobs to more electricians.” – Kevin Cole, CEO, Ennis Electric Company, Manassas, VA
“In the end, we may be forced out of business altogether, and that would harm not only our business but our community and the economy of our nation.” – Mara Fortin, owner, Nothing Bundt Cakes, San Diego, CA
“With this major change in policy, small business owners are faced with increased uncertainty. It throws the whole franchise model into peril …” – Ciara Stockeland, owner, MODE, Fargo, ND
“I now have to pay out of my own pocket for products and services that I used to receive as part of my franchise fee … This has drastically slowed down our hiring process and impacted our growth, and it will make it harder for us to continue to accept new clients and grow.” – Lynn Berberich, owner, BrightStar Healthcare of Baltimore City, Baltimore, MD
“If the goal of the NLRB is to put small home builders out of business, this may very well be the outcome.” – Edward Martin, president and CEO, Tilson Home Corporation, Austin, TX
“For more than thirty years, my family and I have built a successful business as entrepreneurs, and over the course of a few short months, government officials at the NLRB, DOL [Department of Labor] and OSHA [Occupational Safety and Health Administration] have created a regulatory mechanism to destroy our way of life.” – Vinay Patel, president and CEO, Fairbrook Hotels, Chantilly, VA
It’s job-crushing policies like this that help explain why small business creation has dropped to a 22-year low, and unfortunately, it seems like the NLRB isn’t done yet. House Republicans will continue to oppose this kind of executive overreach and advance policies that empower America’s entrepreneurs and workers to succeed.
