Report: Labor Union Attack on Franchise Businesses and Jobs Turns on Politicized ‘Joint Employer’ Lawsuits

A new report by the Competitive Enterprise Institute spells out how a set of lawsuits brought by the National Labor Relations Board (NLRB) attacks independent small businesses, like contractors, franchises and temporary staffing agencies, and could prove disastrous for their employees, job creation, entrepreneurs and consumers.

The report, The NLRB Joint-Employer Cases: An Attack on American Business, specifically addresses an effort by the NLRB General Counsel Richard Griffin and the Department of Labor Wage and Hour Administrator David Weil to radically redefine the employment status of millions of Americans. Designating companies with certain business models as “joint employers”, including many restaurants, gas stations, day care providers, cleaning services, auto repair shops, hotels, and more, puts these businesses and their millions of employees’ jobs at risk.

“If this labor union attack on franchises, contractors and other outsourced services succeeds, it is American workers, consumers, and entrepreneurs who will be harmed. As a result of the higher costs of litigation, compliance, and union disputes, employers will be forced to cut jobs and close businesses,” said Aloysius Hogan, CEI senior fellow and author of the report.
According to the report, this move would only benefit the special interests of union bosses and trial lawyers, and the consequences would reach far beyond the names involved in the lawsuits–McDonald’s, CNN, and Browning-Ferris Industries (BFI).
“Labor unions and trial lawyers want to target large corporate businesses because they believe it’s easier and more lucrative to unionize, pressure, and sue one big, single business than many smaller or separate businesses,” said Hogan. “As litigation could take years to resolve, mounting uncertainty is already holding back job creators. Congress should provide legislative relief to employers and workers who will suffer as a result of the National Labor Relations Board aggressive, pro-union agenda.”

Highlights from the report include:

  • The joint-employer cases threaten to overturn decades of established precedent, upsetting the expectations of thousands of businesses that have relied on the current rules in developing their business models and practices.
  • Joint employers are more easily unionized, which will allow Big Labor to exploit large companies’ sensitivity to attacks on their reputations. Recent research shows that unionization means a 15 percent wage loss for workers resulting in franchises regularly creating jobs faster than other businesses.
  • Joint employers can be sued more readily by trial lawyers because they share liability for an employee’s actions. More parties and deeper pockets to sue mean higher business costs and hampered job growth.
  • At stake is the survival of America’s popular franchise system—more than 770,000 businesses and 8.5 million employees—that has made starting a business easier for thousands of Americans. Temporary staffing agencies, with an average of 3.15 million workers per week, would also be affected.
  • Whether it’s Jiffy Lube, H&R Block, Subway, 7-Eleven, Days Inn, Great Clips or others, franchising offers entrepreneurs a proven pathway to opening their own businesses—including a well-tested business model that offers brand recognition, operational expertise, and marketing. 

>  View the report, The NLRB Joint-Employer Cases: An Attack on American Business