‘Joint Employer’ Status Represents a Loss of Autonomy for Small Business Owners

August 26, 2015

New regulations proposed by Obama labor arbiters could strip entrepreneurs of the flexibility they need to survive, according to the business community.

Small business owners and labor experts told a House subcommittee on Tuesday that joint employer standards proposed by the National Labor Relations Board (NLRB) would destroy the franchise business model.

The proposal, which stems from a decision issued by NLRB General Counsel Richard Griffin in July, broadens the joint employer standard so that both the franchisee, the individual operating the business on a local level, and the franchisor, the larger corporation that controls the brand name, are considered "joint employers."

Witnesses at the hearing claimed that the NLRB’s proposal would detract from the franchisee’s autonomy and flexibility, hurt business efficiency, stifle job growth, and create labor unrest.

Retired Air Force Col. Steve Carey, the owner of a CertaPro Painters franchise in Alabama and a witness at the hearing, said the proposal would severely limit his autonomy as a small business owner. Without control over his employees, Carey said, his business would not maintain the flexibility it needs to survive.

"I have the autonomy to run my business as I see fit. I make the decisions every day, and that’s what I bought in to," he said.

The revised standard would require multi-employer bargaining units composed of employees who work for different employers. It could also give the franchisor greater control over the franchisee’s local business, according to Carey.

Rep. Bradley Byrne (R., Ala.) said that expanding the joint employer standard would impact consumers across America.

"Expanding the definition of joint employer increases the liability of doing business. It changes the franchisee-franchisor relationship; it disrupts the flow of commerce, and puts long-term job growth in jeopardy. These proposed changes will directly impact products and services that people have come to depend on across the United States," said Byrne.

Marcel Debruge, a partner at the law office of Burr & Forman and a witness at the hearing, said the proposal would impose a "one-size-fits-all approach" on businesses that face local circumstances, such as varying minimum wages and other workplace regulations. This approach would detract from the businesses’ flexibility.

"Flexibility is critical to Alabama’s manufacturing facilities—it means having the right number of trained workers and being able to classify those workers in a way that makes economic sense," he said.

Debruge said the NLRB’s motive for re-definition was to "increase the number of people who pay union dues" and that the joint employee status would act as "a blank check for the NLRB to create these joint employment relationships whenever it wants to."

He added that the proposed change would only worsen the relationship between workers and unions.

"Forcing these newly defined ‘joint employers’ to negotiate together with a bargaining unit comprised of people who work for different employers is not the way to promote flexibility, contain costs, and increase competitiveness. It will result in more litigation, more labor unrest, more strikes, more picketing, more union organizing drives, and ultimately, fewer jobs," Debruge said.

Subcommittee chairman Rep. Phil Roe (R., Tenn.) agreed with Debruge, saying that destroying the franchise model would destroy the spirit of entrepreneurship.

"The last thing we need is an unelected and unaccountable board of bureaucrats to make it more difficult to pursue the American dream," he said.

Published under: NLRB