Throughout this country small businesses have proven to be the backbone of our economy. According to the Small Business Administration, in the first three fiscal quarters of 2014, small businesses added 1.4 million new jobs, 39 percent of which were from business that employ fewer than 50 people. Small business owners are invested in the community—many have grown up locally in the area. They do most of the hiring in their community, support one another, and are a familiar face to their customers.
Because businesses are so vital to our communities and nation, we must ensure that our government works for them, not for some federal bureaucracy. However, the unfortunate truth is that many business owners believe their best interests have been steamrolled by an arbitrary, confusing and often illogical system of rules and regulations. A perfect example of this is an issue known as, “joint employer.”
For over three decades, the joint employer standard has been a cornerstone of federal labor law, protecting businesses from liability arising from actions over which they have no actual or direct control. In a 2015 ruling, the National Labor Relations Board (NLRB) upended this existing standard in favor of a vague new rule that threatens the viability of small business in America, particularly the contractual relationships that exist between franchisors and franchisees.
The foundation of healthy franchise systems is communication and guidance, providing entrepreneurs, who have never owned a business before, the benefit of access to a business model under which they may benefit from access to tried-and-true business practices. It is not a difficult concept: franchisees pay a franchise royalty fee to acquire support from a system forged in experience and success. Through this investment, they are given access to their brand’s best practices, which gives them a leg-up to success on their own.
However, under the new joint employer standard, franchisors are being forced into the unfortunate position of pulling back that well-intentioned support, lest they be deemed a joint employer and exposed to random litigation. So franchisors, by necessity, are able to provide first-time small business owners less support, which in turn means lesser potential for success.
Federal labor law and issues like joint employer can be, and usually are, complicated, but fairness is not. The government sets rules, but in doing so, the government also has an obligation to respect the vulnerability of the entrepreneurs, their investments, and contracts. These small businesses are merely asking us to uphold the standard that has worked well for more than three decades in providing fairness, but never, as it does today, hindering opportunities for success.
We must ensure that our small businesses receive fair treatment from their government – not confusion and injustice. We have heard from small business owners throughout our districts and the country who are concerned about the potential impact the joint employer rule will have on their business. Small business owners deserve better and we call on our colleagues from both parties to support them and prevent this harmful regulation from becoming law of the land.
MacArthur represents New Jersey’s 3rd District and Cuellar represents Texas’ 28th District and serves on the Appropriations Committee.
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