The $1.8 trillion omnibus bill passed by Congress has a little bit of everything—the delay of several Obamacare provisions, billions of dollars in tax relief, even a definition for “hard cider.” But something was left out and its omission could deal a huge blow to American small businesses.
Not included in the bipartisan spending package was a proposed rider blocking the “joint employer” standard—a rule recently introduced by the unelected bureaucrats at the National Labor Relations Board (NLRB) that redefines what an employer is under labor law. This new standard would upend the wildly successful franchise system that has allowed millions of Americans—especially minorities—to pursue the American Dream.
As Job Creators Network has explained in the past, joint employer means that franchisors such as McDonald’s, Burger King and Papa John’s could be liable for labor violations at local franchises—even though they are separate, individually-owned businesses. Franchisees pay for the right to run their small business as they choose, decide who to hire, how much to pay, and what benefits to offer employees. Franchisors have virtually no role in franchisees’ daily operations. Yet the NLRB is trying to define them as joint employers.
The franchise model has worked for decades. Franchisees get the freedom and independence to run their own business where and how they want; franchisors get to see their brand and business model expand around the country. The numbers tell the story: Franchising has created about 770,000 small businesses, supported 18 million jobs, and has added more than $2 trillion to the American economy.
But the NLRB’s new joint employer rule would blur the lines between big and small business. The joint employer standard provides a clear incentive for franchisors to scale back on franchisees as a way of avoiding commercial headaches and legal migraines. And the franchisee, who essentially works for the franchisor under the new standard, may think twice before signing any franchising deal.
This is especially harmful for America’s minority neighborhoods. Minorities make up 20 percent of all franchise ownership, who often locate in minority communities and employ those who live nearby. Many minority job-seekers rely on franchisees for entry-level work – a lifeline in communities facing double-digit unemployment. But joint employer status makes it more difficult for minority franchisees, some of whom spend their life savings on a chance at entrepreneurship, to set up shop and become a job creator.
Why “fix” what isn’t broken? The NLRB’s regulatory impulse encroaches on working America for no perceivable benefit.
Job creators had hoped the omnibus bill would address the NLRB’s overreach in redefining the definition of joint employer and bring relief to job creators. But by the look of things, Congress has become a willing accomplice.
Alfredo Ortiz is CEO and President of Job Creators Network.
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