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Joint Employer Scheme Threatens Job Creation and Entrepreneurship

The House Committee on Education and the Workforce, chaired by Rep. Virginia Foxx (R-NC), held a hearing today to examine the growing threat to job creation, entrepreneurship, and small businesses posed by the expanded definition of joint employer under federal labor laws.  

“Opportunities through franchising, as well as contracting, have empowered countless Americans to climb the economic ladder and obtain a better quality of life for their families,” Chairwoman Foxx said. “Sadly, unelected bureaucrats who have never owned a business or made a payroll launched an unprecedented attack on these successful business models that so many rely on.” 

Members heard from Jerry Reese, who works for Dat Dog, a local hot dog restaurant in New Orleans. Reese began working for the small company as a part-time employee during college and worked his way up into a position managing franchise development. He explained how the new joint employer standard threatens Dat Dog’s ability to grow and create jobs in their community.  

“Implementing our expansion plan will certainly depend on Congress’s willingness to help address regulatory obstacles that make the future growth of small businesses, like ours, uncertain,” Reese said. “As with any business that is fortunate enough to grow, we now face new risks. Joint employer is the most prominent risk on our minds.”  

Reese continued, “Make no mistake about it: this policy disproportionately affects small businesses. Big corporations have the resources, the attorneys, and the economies of scale to adapt to joint employer … It’s the small employers like Dat Dog that may run out of resources before we even get started.”  

Mary Thompson, chief operating officer of franchise brands for Texas-based Dwyer Group, explained that the business model that led to her success is now at risk.  

“More than two decades ago I started my own business in Texas with two employees after serving in the Marine Corps,” she said. “The support and resources I received from the franchise model made that dream possible. And it’s disappointing and sad to see that the kind of support I was given that led me to grow successful businesses, is being pulled away because of these new and unfair standards.”  

Thompson called on Congress to act, saying, “The fact that this hearing is occurring makes me hopeful that Congress can act to fix these standards and move back to a system that encourages the economic growth franchises have been proven to generate.”  

Members also heard from Richard Heiser, a vice president for FedEx, which contracts with many local vendors. Heiser testified that the new joint employer standard threatens entrepreneurship.  

“Most entrepreneurs start companies because they want the flexibility and autonomy inherent in owning their business,” he said. “Todays’ expansion of joint employment risk threatens that autonomy. If businesses are going to be held liable for the actions of their vendors, then they are more likely to exercise greater control over the business relationship, thereby diminishing the role and investment of the entrepreneur.”  

Roger King, senior labor and employment counsel for HR Policy Association, warned that the joint employer scheme hurts workers and leads to higher litigation costs for job creators.  

“Workers in certain instances may be penalized by not being provided certain benefits due to an employer’s concern that the extension of such benefits to supplier employed individuals would make it a joint employer,” he said. “The only real winners in the current status quo of ambiguity and excessive litigation in the joint employer area are lawyers, and perhaps law professors.” 

Chairwoman Foxx shared the concerns raised by witnesses and expressed the committee’s support for restoring the commonsense definition of joint employer. 

“It’s time to put an end to this extreme and partisan policy that does nothing to help American workers and makes it harder for entrepreneurs to pursue their dreams … It is my hope that hearing firsthand accounts today of the job-crushing impact of the expanded joint employer standard will build new momentum here in Congress to find the solution Americans need.”

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