In President Obama’s State of the Union address, he echoed a theme that has been constant throughout his tenure, saying, “how do we give everyone a fair shot at opportunity and security in this new economy?”
One way President Obama could have a productive final year in office and work toward expanding opportunity is by directing the National Labor Relations Board to stop making it more difficult for employers to hire and entrepreneurs to get started. During Obama’s time in office, the NLRB has imposed costly regulations that threaten to disrupt workplaces around the nation and the greater economy.
One example is the NLRB’s recent change to the joint employer standard.
For decades, a franchisor and franchisee were considered two distinct entities. This is commonsense. A franchisee is an independent small business owner that hires and fires employees, creates their schedules, and is responsible for any labor violations against its employees. This business relationship benefited all involved—employers, consumers, and workers. It allowed entrepreneurs an easy way to strike out on their own. They are able to use the franchisor’s brand name, and benefit from the parent company’s marketing efforts and tested business methods. In return, the franchisee is liable for its day-to-day business practices and is their own boss.
The franchise business model thrived under the decades old joint employer standard. Franchises employ millions of workers and account for 10 percent of new jobs in 2013 and 2014. Projections from the International Franchise Association show that the “gross domestic product (GDP) of the franchise sector will increase by $521 billion or 5.2 percent in 2015, an increase over the $496 billion generated in 2014.”
In his SOTU address, President Obama claimed, “I believe a thriving private sector is the lifeblood of our economy. I think there are outdated regulations that need to be changed, and there’s red tape that needs to be cut.”
Despite this, the Obama administration shows no sign of cutting red tape and even threatened a government shutdown over a Republican effort to defund enforcement of the NLRB’s new joint employer standard.
So we are left with the NLRB’s decision in Browning-Ferris that could have dire consequences on the franchising industry that is one of the bright spots in the economy and outpaces the rest of the economy in job creation.
I explained how the Browning-Ferris decision changed the joint employer standard in The American Spectator: “[T]wo businesses were deemed joint employers only when they both exercised substantial, direct and immediate control over hiring, firing, disciplining, supervising, and directing workers. Now, however, the NLRB has expanded the definition of ‘joint employer’ to include indirect control, unexercised potential control, and a fuzzy notion of ‘the totality of a putative employer’s influence over employees’ working conditions.”
By increasing liability on franchisors, the parent company will have to decide if assuming the additional risk is worth it. Franchisors may choose to operate stores instead of franchising, which will limit opportunity for entrepreneurs. A new report from FRANdata projects, “At least 40,000 small businesses operating in more than 75,000 locations are at risk of failure” due to the NLRB’s new joint employer standard.
Unfortunately, we know why the Obama administration issued the decision that could be devastating for the franchise industry—to ease union organizing campaigns. We found out what was already known in the NLRB’s effort to pin joint employer status on McDonalds and make it liable for labor violations of its franchisees. Over at Investor’s Business Daily, I wrote, “In a rare moment of clarity on why the NLRB is going after McDonald's, NLRB General Counsel Griffin recently told an American Bar Association forum that the "sole" reason the agency is aggressively pursuing a case against McDonald's is because of the union-funded "Fight for $15" campaign.”
President Obama is willing to put thousands of jobs at risk all just to ease union organizing campaigns. A Competitive Enterprise Institute report highlights the negative impact of collective bargaining on wages: “over a period of 50 years, the cumulative reduction in worker wages would be about 15 percent.”
Further, a recent Gallup poll shows that non-union workers are more satisfied than their union counterparts in a variety of categories—workplace physical safety conditions, recognition for a job well done, flexibility of hours, and job security.
So, if President Obama truly wants American workers to be successful and have a fair shot, then it is time for government to step aside and remove harmful regulations—especially when the motive behind such regulations is to prop up the special interests of labor unions at the expense of job opportunities that hardworking men and women desperately need.