As noted in a recent article on this website, a National Labor Relations Board decision that expands the definition of "employer" is expected to have a big impact on small businesses that make their livings as contractors, subcontractors, or employment agencies for commercial customers.
Another result of the NLRB decision is that franchisors and franchisees are among the business relationships that will also be affected by the ruling. The NLRB ruling comes one month after an earlier NLRB ruling stating that franchisors, such as McDonald's Corporation, are now considered "joint employers."
In a recent press release, Steve Caldeira, president and CEO of the International Franchise Association, noted, "The NLRB's recommendation that franchisors and their franchisees be designated as joint employers is both wrong and unjustified. Millions of jobs and the livelihoods of hundreds of thousands of independent franchise small businesses are now at risk due to the radical and unprecedented nature of this decision. Ruling that franchises are joint employers will be a devastating blow to franchise businesses and the franchise model."
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The IFA press release went on to note that, "Franchisees and their employees do not work for franchisors. The franchise owners who have built more than 770,000 businesses and employ millions of people control their own businesses. Franchisees have their own employer identification number with the Internal Revenue Service and file their own taxes. Franchisees establish day-to-day operations, employment practices, and policies for their own businesses. Franchisees decide who to hire and fire, and also set wage rates, benefits, and employees' work schedules."
If franchisors are joint employers with their franchisees, according to the IFA press release, these thousands of small business owners would lose control of the operations and equity they worked so hard to build. "The jobs of millions of workers would be placed in jeopardy, and the value of the businesses that employ them would be deflated."
The IFA press release added that it was concerned that franchisors could now be drawn into national labor disputes as a result of concerns and complaints filed by employees of the individual franchise owners. "The new standard would also increase the likelihood of union campaigns against national businesses, while forcing small businesses to become engaged in protracted, unnecessary, and costly legal battles," said the press release.
On August 25, in testimony before the Subcommittee on Health, Employment, Labor & Pensions of the House Education and Workforce Committee, Steve Carey, who owns a CertaPro Painters franchise, a commercial painting company, stated: "I am worried that … my days as an autonomous small business owner may be numbered. My business may no longer truly be my own. If my liabilities extend back to CertaPro as the franchisor, I have to assume that they are going to want a role in managing risks and protecting against those liabilities. Now, instead of occasionally providing me with guidance and support, CertaPro will be an active participant in the day-to-day operation of my business. They will probably want a say in how we run our business, who we hire, and what we pay. My freedom and autonomy, the entire reason I wanted to own my own business, will vanish."
"Small business subcontractors and franchisees provide millions of jobs for American workers," said the National Retail Federation in a press release. "This is just one more example of unelected government bureaucrats creating roadblocks in the path of job creation and economic growth."
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