In a 2010 speech, President Obama said small business “is as American as apple pie. Small businesses are the backbone of our economy.” He went on to say his administration is guided by a simple idea that “[g]overnment can’t guarantee success, but it can knock down barriers that keep entrepreneurs from opening or expanding.”
Clearly, the members of the National Labor Relations Board must not take President Obama’s speeches too seriously. The Board’s decision in Browning-Ferris erects another barrier for small businesses and entrepreneurs. At a time when 94 million Americans are looking for work, now is not the time for a group of unelected bureaucrats to stifle small businesses that create 60 percent of all new jobs.
Browning-Ferris overturns decades-old precedent on when an employer is responsible for another employers’ employees. Greatly expanding the standards of what constitutes a joint employment situation threatens to ensnare businesses all across the nation in labor relationships they never expected to be in, and make them liable for employees they didn’t know they had. The NLRB decision will disrupt the stability and flexibility on which thousands businesses across the country rely.
By making employers liable for the practices of contractors, franchises, and temporary staffing agencies, companies will likely bring many functions in-house, take greater control of operations, or eliminate jobs.
While the goal of the NLRB may be to stick it to Big Business, which the Board views as insulating themselves from liability and collective bargaining responsibilities, small business is the one getting the shaft.
Independent small businesspeople and entrepreneurs go into business because they value autonomy and flexibility of being their own boss. Under the new joint employer standard, many of the incentives to go into business for yourself will vanish. Many of these job creators have expressed their fears on how they will lose autonomy and opportunity.
Ed Rothschild, owner of several AlphaGraphics franchises in the Denver area, says, “I know what’s best for my business… I don’t need a lot of help running it.”
Mara Fortin, franchisee of Nothing Bundt Cakes, worries that her franchisor fee will increase and she will lose control over her business. Worse, Fortin questions whether “we want to grow or expand given this climate of uncertainty and increased risk.”
Unfortunately, for the millions looking for work, the small businesses—contractors, franchises, and temporary staffing agencies—under attack by the new joint employer rule are the one’s driving economic growth and job creation.
Franchise businesses have created jobs faster than other businesses from 2007 to 2014, and have accounted for over 10 percent of new jobs created in 2013 and 2014. Franchise operations make up 3 percent of U.S. Gross Domestic Product and $890 billion of economic output.
Three million workers earn a living from temporary staffing agencies. National Federation of Independent Business’s Roger Hays points out temporary work leads to full-time employment and expands worker opportunity:
Staffing agencies, who are subcontractors, not only fill an important economic void, they are also re-entry points for many looking to get back into the workforce fulltime. A stay-at-home mom, whose children are now off to college and cannot expect to be hired fulltime, can gain marketable experience by working part-time at a temporary agency that has done the training and paperwork for its clients.
The NLRB does not seem to realize that the economy is moving away from traditional employer-employee relationships. A Government Accountability Office report estimates that the contingent workforce could be more than “a third of the total employed labor force.”
As I remarked in a recent report, “Ultimately, the potential changes in the joint employer standard would advantage a small group of special interests [Big Labor and trial lawyers] while endangering 770,000 franchise businesses and countless firms that use outsourcing which adds up to 8.5 million employees and temporary staff.”