March 12th, 2018
Chip Rogers: Obama-era ’employer’ definition back from the dead to destroy franchises
Who is your employer? Most people don’t have trouble answering this question. In fact, it’s something so obvious that only Washington bureaucrats could confuse it.
Last month, the National Labor Relations Board decided to return to a “joint employer” standard, determined under its 2015 Browning-Ferris ruling that expanded the definition of employer to any business that exercises indirect control over the terms of employment. This is a change from the longstanding legal precedent of the business that “meaningfully affects matters relating to the employment relationship such as hiring, firing, discipline, supervision, and direction.” Not to mention common sense.
Under this joint employer standard, if a hotel contracts out its landscaping work to a local business, does it become the employer of the guy watering its shrubs? Potentially. No one really knows because the Browning-Ferris standard is so vague and indeterminate.
To clear things up, Congress must codify the definition of joint employer into law by passing the Save Local Businesses Act.
What’s the big problem with a nebulous joint employer definition? It threatens to destroy the franchising and contracting business models upon which the economy is supported. These business models have also been proven routes to small business success for thousands of hoteliers and countless minority business owners.
Joint employer means joint liability. Under the Browning-Ferris standard, franchisors and contractors could be responsible for the hundreds of daily decisions made by their franchisees and sub-contractors. If a hotel’s landscaping contractor screws up, the hotel could be sued.
To protect themselves from a slew of lawsuits, franchisors and contractors will have to become far more discerning in to whom they franchise and contract. Established players with a long history of success: in. Risky upstarts trying to achieve the American Dream of small business ownership: out.
As a result, a joint employer standard will be a shot across the bow of the franchise and contracting business models. The franchise model alone is responsible for 13.3 million jobs and $1.6 trillion of GDP.
But even existing franchisees would feel consequences as franchisors are forced to become more hands on in an effort to prevent lawsuits. Franchise owners would turn from small business owners into managers under a micromanaging corporate parent. Not exactly what they signed up for.
The joint employer winners are trial lawyers and Big Labor, who can direct their efforts at one, well-capitalized franchisor in, say, Chicago, rather than going franchisee-by-franchisee in Charlotte, Charleston, and Chatanooga.
Late last year, President Trump’s NLRB killed off the Browning-Ferris standard created by Obama’s NLRB appointees. Or so they thought. It turns out that the Browning-Ferris joint employer standard is a political zombie, and it’s back from the dead. Sen. Elizabeth Warren (D-Mass.) was able to convince the inspector general that there was a conflict of interest because the deciding vote was cast by a member whose prior firm opposed the Obama ruling. As a result, the NLRB vacated their December decision and returned Obama’s Browning-Ferris standard.
Congress must act to fix this bureaucratic boondoggle. The good news is that the Save Local Business Act, which would codify the traditional employer definition into law, already passed the House of Representatives last year. Now the Senate must take it up. This is bipartisan legislation that should have no problem achieving 60 votes even with Democrats’ reliance on trial lawyer and union donations.
Congress can bring back common sense to the employer definition and prevent the freezing of franchise creation. Unlike the bureaucrats who gave us this joint employer mess, Congress faces accountability at the ballot box in a few short months.
BY CHIP ROGERS, OPINION CONTRIBUTOR
Chip Rogers is president and CEO of the Asian American Hotel Owners Association and a member of the Job Creators Network.