September 18th, 2017
The Hill: Congress must pass the Save Local Business Act to provide clarity on the joint employer issue
The Hill | By Robert Cresanti, Katherine Lugar, and Chip Rogers | 9/15/2017
More and more, it’s becoming clear that changing the joint employer standard that so many have relied on for decades makes no sense. The numbers simply don’t add up.
Just this week, the American Action Forum released a new study on labor market trends in the hotel industry. Building on previous research that found the expanded National Labor Relations board joint employer standard responsible for the loss of up to 1.7 million U.S. franchise jobs, this new analysis found that the expanded joint employer standard is already creating problems especially for the hospitality industry, where a substantial segment of the workforce is employed by franchises.
Through its research, AAF found that in 2015, before the NLRB broadened the definition of joint employer, jobs in hotel franchises and non-franchises grew at an annual rate of 1.8 percent and 1.9 percent, respectively, but in 2016, following the NLRB’s joint employer ruling, hotel franchise job growth dropped 71 percent, while non-franchise job growth declined by only 26 percent. In addition, AAF found that wage growth has stalled and work hours are beginning to contract.Also of note, the Progressive Policy Institute (PPI), a self-described “intellectual home of the New Democrats,” corroborated AAF’s assertion of the impact of NLRB’s joint employer action on economic growth. In remarks this week, Dane Stangler, PPI’s director of Policy Innovation, suggested that one of the consequences of the expansion is a further reduction in “business dynamism,” raising barriers and crowding out entrepreneurs who have historically entered the market through franchising. Stangler stressed that fewer business startups will lead to fewer jobs being created across all industries, which could spell trouble for the U.S. economy.
While this research paints a clear picture of the impact of joint employer on local businesses and the overall economy, the problem is more personal than economic indicators alone. Protecting these businesses and their employees is simply the right thing to do. While hotels exist to serve guests, support jobs, and provide a living for their owners and employees, they also provide valuable services within their communities. It would be remiss to ignore the reasons why this industry is making headlines this week in the aftermath of Hurricanes Harvey and Irma.
When a natural disaster strikes in America, the local hotel industry has always been among the first to respond. In recent weeks, hotels in our southern states – many of them franchise locations owned by local residents – have become home base and ground zero crisis management centers, providing housing for first responders, FEMA staff, displaced families, employees and the thousands of good Samaritans who are flocking south to help victims clean up and rebuild. These are actions at the heart of our industry and which we have looked upon with pride and admiration.
With these factors in mind, those of us serving and supporting local businesses and the American hospitality industry here in Washington, D.C. advocate on its behalf, most recently on the issue of clarifying what it means to be a joint employer.
Prior to the NLRB’s 2015 ruling, businesses were deemed to be joint employers only if they exercised “direct” or “immediate” control over another company’s employees. Under the NLRB’s new rule, even “potential” or “indirect” control of an employee could label a business owner a joint employer. It was inevitable that this ambiguity has created confusion and uncertainty about these businesses’ exposure to liability, and consequently, about their future viability.
For the last two years, local business owners have pleaded with elected officials to recognize the harmful impact of this new rule on their businesses, communities, and economies. They have testified before Congress 28 times, citing how the NLRB joint employer designation is hurting both their businesses and employees. They have supported bipartisan efforts seeking clarity, not the least of which is a recent action by House Democrats asking the NLRB to clarify specific elements of its actions on joint employer. Unfortunately, this request went largely unanswered.
Moreover, hundreds of local businesses are on Capitol Hill this week to ask members of Congress for their support and provide them with a window into the world of small business ownership – what they have worked hard to build, the challenges they face, and the vital role they play within their communities, as we have seen this month in Texas and Florida.
Drawing from both economic and compassionate points of view, the evidence supports the same conclusion: the expanded joint employer standard is not working. We are grateful that Congress has in its hands a solution to this existential crisis facing local businesses in America, and we hope they’ll commit to showing the urgency in responding that this issue requires. Let’s work together to support these local businesses – as they continue to support their communities in both good times and bad – and pass this important legislation.
Robert Cresanti is president and CEO of the International Franchise Association; Katherine Lugar is president and CEO of the American Hotel and Lodging Association; and Chip Rogers is president and CEO of the Asian American Hotel Owners Association.