Shedding Light on Unconstitutional Federal Regulations
September 22, 2017 – Fighting for America's Small Businesses
Overturning the Joint Employer Rule
What does this regulation do?
In 2015, President Obama’s National Labor Relations Board (NLRB) expanded the definition under which it considers two businesses to be “joint employers.” The new definition changes a 30-year-old standard for the employer-employee relationship from direct impact to indirect impact. Under this new rule, businesses who outsource, contract, or franchise will be held liable for the employees and working conditions of the contracted company or individual franchise owner.
Shortly after the NLRB’s change, the Department of Labor issued a similar expansion of the joint employer standard under the Fair Labor Standards Act.
Why is this a problem?
The expansion of the joint employer definition blurs the lines of responsibility for decisions affecting the daily operations of small businesses. This change will have a chilling effect on the willingness of large companies to contract with smaller companies or establish franchises, making it harder for entrepreneurs to achieve success.
Franchises are an economic driver in Arizona, where 15,000 franchises contribute $8.2 billion to the state’s GDP and provide 153,000 jobs. The expansion of the joint employer rule will negatively impact these numbers and local small business owners by making it more difficult for them to remain in business.
How can we solve this problem?
In June, the Department of Labor rescinded their expanded definition, returning to the “direct” standard. However, the NLRB has not yet taken the same action. Since the NLRB acts as the main enforcer of federal labor law, their standard will continue to affect businesses.
Congress has the ability to overturn these harmful policies by passing H.R. 3441, the Save Local Business Act, introduced by Congressman Bradley Byrne from Alabama. This legislation rolls back the NRLB’s expansion of the joint employer definition, and prevents unelected bureaucrats from taking similar actions in the future. Congress has a responsibility to protect small businesses across our nation, and I am happy to support this bill’s effort to do that.
What are they saying?
“The NLRB’s controversial joint employer standard upended business operations for restaurants across Arizona. The new vague standard opens businesses up to unnecessary liability in all types of service contracts that are necessary to managing a restaurant. We support the Save Local Business Act which will restore the traditional joint employer standard for all businesses.” - Steve Chucri, President and CEO, Arizona Restaurant Association
“In the aftermath of the 2015 National Labor Relations Board decision in 'Browning-Ferris Industries,' the federal legal standard for a 'joint employer' was changed to cover nearly any business contract. This open-ended standard has resulted in uncertainty and an unpredictable liability standard for local Arizona businesses. The Save Local Business Act would provide common sense clarity in federal labor law for what it means to be a joint employer. The impact on local businesses throughout Arizona cannot be overstated. 'This is the most important legislation for franchising in a generation.'" - International Franchise Association President and CEO, Robert Cresanti
“We appreciate the efforts being made to address the Joint-Employer rule by pursuing passage of H.R. 3441, the Save Local Business Act. Without congressional action, retailers will continue to face unlimited and unpredictable joint employer threats that slow job creation and entrepreneurship.” -Arizona Retailers Association
"At Keyser we provide support for many franchise brands around the country and the support comes from right here in Arizona. The Joint-Employer rule has hurt the franchise businesses we serve, companies such as Massage Envy, Five Guys, Rosati’s Pizza and Amazing Lash, by adding uncertainty and mis-allocating the responsibility that my clients who are local small business owners to the parent franchise company. Our clients like to be in control of their own local businesses and appreciate the ability to add value in their local markets. The Joint Employer rule would link their liability with a distant company that they have no control over. These small business owners are a major fuel for the national and local economy and we want to make their growth easier and not harder. Every minute of focus they spend on guarding against the actions of their parent franchisor is time they are not spending supporting their local community. Supporting the removal of the Joint Employer standard would bring the control back to the small business owners in our local community and allow them to grow and create jobs for our youth, neighbors and friends." -Keyser, Scottsdale, AZ