By Ali Nekumanesh |
There are always unknowns in business. When I joined a local family’s company in 2008, I couldn’t be certain that the ambitions to transform the seven-unit deli into a thriving franchise would succeed. We put in the hours and made the best decisions possible based on available information and resources – and it worked.
The franchise foundation on which we built a 100-restaurant chain is shifting. The reason – an evolving “joint employer” standard that is so vague it is practically meaningless.
For some context, take our company, Deli Delicious. We developed a successful restaurant concept with growth potential. By becoming a franchisor, we then allowed other entrepreneurs to open their own locations under our brand.
Being a franchisee is just like running any other small business. You hire the people you believe in and manage them your way. After all, they’re your employees, or at least they were.
Now, I am not even sure who is considered to be one of my employees. The National Labor Relations Board (NLRB) expanded the joint employer definition, which I thought to be very straightforward, to a confusing and vague standard of compliance. Under the new definition, a business is liable for employees it has “indirect” or “potential” control over.
Not even my lawyer can tell me what exactly that means. What’s even more perplexing is that additional federal agencies and some states have made a shift to this overly broad standard, adding to the confusion.
This uncertainty can have a chilling effect, especially on small companies without human resources departments. We must seek expensive counsel to determine if simple decisions – like compiling a brand-wide employee handbook or offering franchisees software to track job applications – might put us in legal jeopardy.
The hard truth is that many businesses will step away from offering these crucial benefits rather than take the risk of being a guinea pig in a lawsuit.
The new standard also puts at risk the very services that make franchise businesses so attractive to entrepreneurs, like support for business training and development, as well as guidance on wage and hour compliance. Corporate apprenticeship and employee support programs will also find themselves on the chopping block.
We already know there is a shortage of skilled workers in the U.S., according to a recent study by Third Way. Without businesses and corporations investing in workforce development, the skills gap is bound to grow, putting young and inexperienced workers at a severe disadvantage.
If franchise brands must change how they handle apprenticeships and worker training, we cannot continue to generate the opportunities we do today.
That’s a shame, because franchising is one of the most accessible paths to the American Dream. You don’t need to be born a millionaire to expand on a great idea. You start small and invite in other entrepreneurs who invest modest amounts to capture the dream for themselves.
In California alone, this adds up to 76,000 individual business owners employing nearly 730,000 people and contributing $69.4 billion to the state economy.
And the franchise business model itself is a big part of why women, minorities, veterans, and hard-working individuals from disadvantaged backgrounds have flourished in our industry. My own family checks a few of these boxes, and I can attest to the power of franchising in lowering barriers and opening doors.
But the new standard changes that opportunity for modest-income Americans, making the financial requirements that franchise businesses set on franchisees more expensive.
Thankfully, in a rare bit of bipartisanship, Democrats and Republicans in Congress are striving to clarify the joint employer definition with a new bill, the Save Local Business Act (House Resolution 3441).
Rep. Lou Correa has signed on. Now we need the entire California delegation to get behind this effort to provide certainty to America’s job creators.
Rep. Jim Costa has always been a strong advocate for small business here in Fresno, and has already begun seeking clarity for small business owners on what it means to be a joint employer. We hope he, too, will sign onto this bill and help aspiring entrepreneurs enjoy the same shot at the American Dream we all had many years ago.
Ali Nekumanesh is the executive vice president and chief compliance officer of Deli Delicious Franchising, INC. in Fresno. Connect with him at 435-5305.