Coalition Urges Franchise Fix in Omnibus Bill

Groups want Congress to restore old joint-employer standard after NLRB threw out decision

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A coalition of taxpayer and business groups wants Congress to include protections for franchise businesses in the omnibus spending bill being negotiated in Congress.

On Tuesday, 19 organizations led by the pro-free market Competitive Enterprise Institute called on Congress to include the bipartisan Save Local Business Act (SLBA) in the upcoming omnibus bill. The bill seeks to reverse the Obama administration's ruling in the Browning-Ferris case, which held parent companies liable for labor violations committed by franchisors or subcontractors. The act would restore the longstanding precedent that such corporations would have to play a direct role in any alleged violation to be held liable and "would end the confusion and harm to small businesses and the economy caused by the lack of clear joint employer standards," according to the letter.

"A policy that makes businesses liable for the practices of entities completely outside of their control will cause companies to make changes that leave people worse off, such as ending those relationships with smaller businesses. That means fewer job opportunities, fewer opportunities for entrepreneurs, and fewer chances for American businesses to grow and to create jobs," the letter says. "Congressional action is urgent and necessary to fix a problem that is negatively impacting countless small businesses and their employees nationwide."

Franchise businesses had hoped President Trump's election could provide relief at the National Labor Relations Board—the agency that overturned the previous interpretation of joint employment. Trump appointees gave Republicans their first board majority in a decade and quickly reversed a number of Obama-era decisions. In December, the board ruled 3-2 to restore joint employer in Hy-Brand Industries. That decision, however, was thrown out in February after the agency inspector general argued that Trump appointee William Emanuel should have recused himself from the case because his old law firm had handled the issue in the past.

The NLRB decision to vacate Hy-Brand made a legislative fix all the more necessary, according to Matthew Haller, spokesman for the International Franchise Association. The omnibus bill represented the best vehicle for ensuring that the bipartisan act becomes law during an election year. The tax reform bill welcomed by the business community would mean little, according to Haller, if labor regulators dismantle the franchise business model.

"This is the last, best opportunity to solve a major economic problem helping small businesses before the election," Haller told the Washington Free Beacon. "This is what franchisees need to reap all the benefits of tax reform … $140 billion is at risk in light of joint employer."

Numerous federal courts have had to address the issue of joint employment since the Obama administration's 2015 decision in Browning-Ferris, leading to "nine different [legal] tests for determining joint employment," according to Haller.

Trey Kovacs, a labor expert at the Competitive Enterprise Institute, said putting the Save Local Business Act in the omnibus bill would provide a uniform approach to the standard and create certainty among franchisees and their parent companies.

"The legislation would settle ongoing joint-employer confusion by reinstating the rules that employers have relied upon for decades in making decisions on employment and business relationships," he said.

The House of Representatives passed the Save Local Business Act 242-181 in November. The Senate has yet to vote on the measure.