In an unprecedented decision that has union leaders celebrating, the National Labor Relations Board (NLRB) discarded years of settled labor policy and redefined what it means to be an employer. For more than 30 years, the NLRB considered two or more employers “joint employers” if they had “actual,” “direct,” and “immediate” control over essential terms and conditions of employment. As a result, franchisors and franchisees or contractors and subcontractors were not considered joint employers because each employer directed the daily operations of his or her own separate business.
While this policy served employers, employees, and consumers well, unions have demanded a broader approach. A broader definition of employer would make it easier to organize workers, allow unions to force countless parties to the bargaining table, and tie up employers in union red tape. In a partisan decision issued in August 2015, the NLRB obliged and expanded the definition of employer to include those who have “indirect” or even “potential” control over practically any employment decision. The NLRB’s extreme decision will have far-reaching consequences:
- Small business owners will have less freedom to operate their businesses. If a franchisor is responsible for the employment decisions of its franchisees, the franchisor will have no choice but to exert greater control over the franchise small business. That is precisely the scenario franchise small business owners warn would cause them to lose their independence.
- Fewer individuals will have the opportunity to own their own business. Some fear employers will abandon the franchise business model altogether, a model that has helped countless men and women own a small business. Others have raised concerns that the NLRB’s decision will have a chilling effect on employers that contract with small businesses for various services.
- Higher costs for consumers and fewer jobs for workers. If a franchisor is suddenly responsible for managing the daily operations of its franchisees, the franchisor will face higher administrative costs that will be passed on to the franchisee and ultimately result in higher prices for consumers or fewer jobs for workers.
To protect small businesses and the men and women they employ, House Education and the Workforce Committee Chairman John Kline (R-MN) and Health, Employment, Labor, and Pensions Subcommittee Chairman Phil Roe (R-TN) introduced the Protecting Local Business Opportunity Act. The legislation will reaffirm that two or more employers must have “actual, direct, and immediate” control over employees to be considered joint employers.
PROTECTING LOCAL BUSINESS OPPORTUNITY ACT:
- Restores established labor policy that has long served the best interests of consumers, workers, and employers.
- Rolls back a harmful decision that will lead to fewer jobs and higher costs, threaten the livelihoods of countless small business owners, and make it harder for individuals to pursue the American Dream.
- Prevents the NLRB from once again advancing the interests of union bosses at the expense of working families and job creators.