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Joint Employer Liability Stifles Small Business

In Hillary Clinton’s nomination acceptance speech at the DNC convention, she said “Way too many dreams die in the parking lots of banks.” Obtaining financing can be difficult, but according to polling data on small business owners gathered by the Jobs Creator Network, overregulation is a bigger concern of those trying to strike out on their own.

One example of federal government interference that is stifling America’s entrepreneurial spirit is the National Labor Relations Board’s (NLRB) new joint employer standard. In August of 2015, the NLRB decided to expand the instances when one employer is held liable for another employer’s labor violations and responsible for their bargaining responsibilities. Franchise businesses, contractors, and temporary staffing agencies are all being targeted by this change.

Simply, the new joint employer standard adds a considerable liability on firms that use contractors or businesses that franchise. This deters large companies from contracting out non-core functions or franchising. In turn, many independent business people may not get their start if a large business is not willing to work with them.

Decreasing the likelihood of small business formation is also bad news for workers. Since 1990 big businesses have eliminated 4 million jobs while small businesses have added 8 million, according to the Small Business Administration.  As I note in a recent report, there are other ways workers are harmed by the new joint employer standard that unduly burdens small business:

The new joint employer standard also could steer companies away from hiring workers via temp agencies. Many types of businesses have peak seasons when they have short-term need for more personnel. Short-term temporary workers allow businesses to scale up during those busy periods without having to take on the costs associated with full-time employees. A reduction in the use of temp agencies also harms worker opportunity. Many individuals use staffing agencies to reenter the workforce when transitioning from one industry to the next. Placement by a temp firm at a company provides on-the-job training, which provides the individual with marketable skills and a better opportunity to secure full-time employment.

Recent reporting from the Wall Street Journal provides more insight on the kinds of changes businesses are making in reaction to the joint employer standard, which is making it harder on small businesses to succeed:

Shelly Sun, co-founder of BrightStar Care, a Chicago-based franchiser that provides home health-care services through its network of more than 300 franchisees, used to help the businesses talk through employment problems, such as difficult employees. Now, “we refer them to a human resources attorney,” she said.

Her company also stopped paying to host an online system where franchisees could post job openings and screen applicants, Ms. Sun said.

BrightStar franchisees Susan Rather and her husband Jeffrey Tews have since established their own system for $10,000 a year. “That sort of thing will impact the bottom line,” said Ms. Rather, who together with her husband owns four BrightStar home-care locations in Southern Wisconsin.

Thriving small businesses have been a positive influence on the U.S. economy for decades. They add more jobs to economy than big businesses and account for a majority of sales in the U.S. It is crucial that Congress take action to stop unelected bureaucrats at the NLRB from stunting the growth of small businesses and the opportunities they provide to workers.