Congress can rein in NLRB by withholding funds
Congress is facing a looming deadline. It needs to pass a bill by Dec. 11 to fund the government for the next fiscal year and avoid a government shutdown. The legislation will undoubtedly include wasteful spending, but some good could come out of it.
Policy riders, which can rollback agency overreach, give Congress a golden opportunity to undo a recent overreaching decision by the National Labor Relations Board that will adversely impact small businesses, a key driver of job creation.
In its August 2015 ruling in the case Browning-Ferris Industries, the Board overturned decades-old precedent, under which two businesses were deemed to be joint employers only when they both exercised direct control over workers, meaning they both had a say in hiring, firing, pay, discipline and supervising workers. That's pretty much common sense — if a company has control of a workforce, it should be liable for labor violations and responsible for bargaining with a union representative of the workers.
Now, however, the NLRB determined that an employer's liability extends beyond the employees it actually hires, pays and has direct control over. An employer can now be held liable for violations or be required to bargain with a union if it only exercises indirect or even potential control over workers.
Everyone agrees that employers should be held responsible for how they treat their own employees. But that responsibility should end when the employer is no longer directly in charge of a group of employees. Both the House and Senate appropriations bills contain policy riders prohibiting the NLRB from applying its new joint employer standard. They deserve to make it into the final legislation.
Unions and the NLRB claim that the decision is only intended to hold big business accountable to workers, but it is small business that will suffer the most damage.
This new sweeping joint employer standard puts the viability of a wide array of business models that are mostly by small businesses at risk — including contracting, franchising and temping. If Congress doesn't defund the enforcement of the NLRB joint-employer ruling, it could upend thousands of business relationships around the country.
Making employers liable for the practices of contractors, franchises and temporary staffing agencies will likely force many of them to bring many functions in-house or take greater control of operations. That will erect and create disincentives to entrepreneurs seeking to start new businesses.
Many small business owners of franchises around the country have spoken out against the NLRB's decision and how it will negatively impact their business.
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."
Former U.S. Air Force Colonel Steve Carey, a CertaPro Painters franchisee in Alabama, questioned whether he could have started his business. In recent House testimony, Carey commented, "I believe that if a broader joint employer standard, such as the one NLRB is contemplating, had been in place seven years ago there is a good chance that CertaPro would not have franchised my businesses, instead they would have chosen to open a corporate location."
The far-reaching joint employer standard could also have a devastating impact on job creation. Franchise businesses created jobs faster than other businesses between 2007 and 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.
The NLRB's joint employer decision weakens incentives for entrepreneurs to go into business by taking away the autonomy and flexibility small businesspeople need. It also threatens job creation in one of the few bright spots in the economy — franchises.
Congress has the power of the purse, and should use it to prohibit the NLRB's joint employer standard that threatens small business and job creators.
Originally posted at the Washington Examiner.