October 5th, 2017
Scottsdale Independent: Local business owners question the future under shifting joint employer rule
By Becky Renner | I always knew that there would be a certain amount of risk and uncertainty when I opened my business 5 1/2 years ago. But I never imagined that government rules and regulations would actively create confusion.
Most small business owners do not have in-house human resource departments or legal counsel to advise them on business decisions, so we depend on clarity in the law. Without it, it’s nearly impossible to anticipate what kind of impact a business decision will have on our companies.
Previously, businesses were considered a joint employer, and were therefore liable for employee-related matters, when they had “direct” and “immediate” control over a set of employees. This included hiring, promotions, scheduling, and evaluations among other things. Unfortunately, the NLRB expanded the definition making “indirect” or “potential” control over labor-related decisions enough to make one company a joint employer of another company’s workforce.That is why the 2015 National Labor Relations Board (NLRB) revision of the joint employer standard has turned the Arizona business community upside down. The once clear-cut standard that defined when two companies shared control of employees is now vague and has left our state’s employers in a state of confusion.
Ever since, the business community has been walking on eggshells trying to figure out what this new standard means.
Arizona’s franchise industry has become especially wary. For decades, the franchise model has been one of the most successful paths to business ownership. Franchisers and franchisees facilitate a mutually beneficial relationship that has allowed for job creation and economic growth across Arizona and the United States. In the Grand Canyon State alone, the franchise industry accounts for 153,300 jobs and generates $13.6 billion in economic output.
Under this model, business owners are given a pathway to grow and aspiring entrepreneurs have the opportunity to open a business under a brand name that already has a strong following. Franchisers also provide franchisees with basic operations guidelines and helpful resources to inspire success.
However, these same features that make franchises attractive also may cause legal risk. The doubt lies in whether having brand standards, sharing tools, or providing employee training guides constitutes decision-making authority.
With a widening skills gap, especially in the Phoenix area, it is concerning that policies coming out of Washington, D.C. would discourage companies and businesses from investing in workforce development. According to Third Way, businesses of all sizes, and in all industries, are struggling to attract and retain skilled workers.
This is a growing problem in all communities, and franchises have always played a major role in helping to train employees for their future careers. Whether it’s providing an apprenticeship program or hiring a first-time worker from the community, franchise businesses have shown a clear investment in their employees.
Fortunately, Congress is beginning to recognize just how confusing this new standard is. Our own Representative Kyrsten Sinema recently signed on to a letter seeking clarity from the NLRB. Then, Democrats and Republicans came together to craft the Save Local Business Act (H.R. 3441). This important piece of legislation would put an end to the questions circling around joint employer and re-establish a clear standard that makes sense.
The Arizona Congressional Delegation has a strong record standing up for the small business community. Hopefully, each one of our elected officials will sign on to H.R. 3441 and provide our small business owners and employees with the kind of certainty that will keep our state moving in the right direction.
Editor’s note: Becky Renner is the Arizona area developer for Orange Theory Fitness Centers.