3 small businesses tell how the NLRB’s ‘joint employer’ ruling will affect them

Can small business owners persuade Congress to block the National Labor Relations Board’s expansion of its “joint employer” standard?

The Coalition to Save Local Businesses hopes so — its lobbying strategy is centered around the impact the NLRB’s decision will have on independently owned franchisees. It featured three of them on a press call it held Monday afternoon.

“Saving local businesses is now what’s at stake,” said Michael Layman, the coalition’s executive director.
In a 3-2 ruling on Thursday, the NLRB ruled that indirect or potential control over the terms and conditions of employment for workers employed by another business is sufficient to be a joint employer of these workers. Exercising direct control is no longer necessary to meet the joint employer standard.
The decision is expected to have a major impact on business relationships in the franchising and temporary staffing industries, as well as for companies that hire subcontractors.

The ruling puts the entire franchising model at risk, because franchisors now are potentially liable for the employment decisions made by any of their franchisees around the country. Franchisors may decide this risk isn’t worth it, and operate only company-owned locations. Or they may become much more involved in their franchisees’ operations. Or they may charge franchisees more to compensate them for their increased liability.

“I fear that my days of being an autonomous business owner are numbered,” said John Sims, who owns a Rainbow Station early education center franchise in Richmond, Va.

Sims, who has 35 employees, said he assumes Rainbow Station “will want to limit their liability” as a result of the NLRB ruling and become “active in the operation of my business,” especially when it comes to personnel matters.

That’s the last thing that Ed Rothschild wants. Rothschild owns several AlphaGraphics franchises in the Denver area.

“I know what’s best for my business,” he said. “I don’t need a lot of help running it.”
Mara Fortin of San Diego, who gave up her career as an attorney to become the first franchisee of Nothing Bundt Cakes in 2007, said she fears the decision eventually could even force her out of business.
“For now we are questioning whether we want to grow or expand given this climate of uncertainty and increased risk,” said Fortin, who owns seven Nothing Bundt Cakes stores with a total of 100 employees.

At a minimum, Fortin expects she’ll have to pay more money in royalties and fees to her franchisor.
Rothschild wonders what impact the NLRB decision will have on the standardized training materials and tech support that AlphaGraphics provides to its franchises.

Franchisees can expect some difficult conversations with their franchisors about revising their contracts.
“Franchisors are not happy about this direction either,” Sims said.

All three of these small business owners have lobbied Congress on this issue, and Layman said they hope to convince members that this issue is about “government overreach into small business.”

“We think we’re going to have a chance to leverage the equity we built with members of Congress this fall,” he said.

They’ll probably have to persuade a veto-proof majority of members in order to succeed, however. President Barack Obama would likely veto any legislation blocking the NLRB ruling. Labor unions view the ruling as a crucial step toward enabling them to organize more workers at franchises and subcontractors.

“It means more working people can engage in meaningful collective bargaining by bringing all parties who control their wages and other conditions of employment to the table,” said AFL-CIO President Richard Trumka.

But Fortin and Rothschild said their workers don’t need a union to look out for their interests — they’re on the same team. Their locally owned and run businesses have the flexibility to deal with individual employees’ needs as they arise. Fortin said the NLRB decision will hurt her workers, because it will raise her businesses’ costs, leaving “less money in the pockets of employees.”