In Defense of Ronald McDonald

Congressional Republicans introduce bill to counter Obama-era regulation reclassifying franchise workers

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Congressional Republicans are attempting to reverse Obama-era labor regulations holding parent corporations responsible for actions undertaken by franchisees.

House Education and Workforce Committee Chairwoman Virginia Foxx (R., N.C.) and 29 co-sponsors introduced the Save Local Business Act on Thursday, which would prevent companies from being held liable for labor violations committed by franchises or subcontractors. Foxx said that the legislation was intended to "correct wrongs that have been created in the past" by the Obama administration.

"I've never liked cleaning up other people's messes, but that's the job we've found ourselves needing to do," Foxx said at a press conference. "We are, in this committee, doing a lot to correct mistakes and bad deeds of the previous administration."

The National Labor Relations Board (NLRB) under President Barack Obama reversed decades of precedent to hold parent corporations accountable for the actions of those who operate under their umbrella, despite the fact that franchisees are responsible for establishing pay, scheduling, and labor practices. The new NLRB standard threatened to unravel the business model of franchise operations, in which small business owners pay fees to open fast food or other chain businesses.

The legislation has won the support of industry groups and labor watchdogs.

Robert Cresanti, president and CEO of the International Franchise Association, called the legislation "critical" to the economy. The joint employer standard set by the Obama board created uncertainty in the industry and Cresanti blamed partisan politics for the NLRB change. Many saw the joint employer liability as a hand out to unions. Under the previous precedent a union attempting to organize workers at a franchise business would have to win support at the local level. Shifting liability would give unions a path to organize at the national level, pressuring parent companies to deliver blanket unionization to all franchises that operate under their umbrella.

"The franchise model has worked well to put thousands of American families into business for themselves, but not by themselves, provide job opportunities to countless hardworking Americans, and contribute tremendous economic benefits to local economies," Cresanti said in a statement. "The traditional joint employer test existed under bipartisan support for decades, free from the partisan struggles that plague our nation today, and it is appropriate that Congress establish a bright line test for employers and employees in this evolving area."

Kristen Swearingen, chairwoman of the pro-free market Coalition for a Democratic Workplace, said that the bill would help protect the 8 million jobs that are provided by franchise corporations. The Obama board's decision, she said, threatened the ability of small business owners to operate since franchise companies would act cautiously knowing they could be held liable for any potential violations. Swearingen said the bill will "restore clarity and protect businesses from unnecessary involvement in labor negotiations and disputes involving workplaces in which they do not have direct control."

"The changes disrupted decades of established law and undermined the business relationships between a brand company and local franchise business owners; contractors and subcontractors; and businesses and their suppliers and vendors – all of which have created millions of jobs and allowed hundreds of thousands of individuals to achieve the American Dream of owning their own business," she said in a release. "The restoration of this standard will protect hundreds of thousands of small and local businesses and allow them to grow American jobs again."

The bill will be debated in the House Workforce and Education Committee.