In the coming weeks, the U.S. Senate will cast a critical vote for the tens of thousands of small businesses in Missouri under siege from the Biden Administration’s National Labor Relations Board (NLRB). That vote, a decision to advance H.J. Res. 98, will bring immeasurable benefit to the economy.
As an entrepreneur who owns and operates 50 franchises that employ 350 people, no issue is more important than a regulation known as “joint employer.” Last October, the NLRB, which is controlled by political appointees of President Joe Biden, replaced a Trump-era joint employer standard with a new expanded version that goes even further than the Obama years.
Under the Trump standard, an entity could only be considered a joint employer by exercising “direct and immediate control” over workers’ employment. Under the Biden rule, any entity with “indirect control” will potentially be deemed a joint employer.
The impact is enormous, especially for the more than 15,000 franchise businesses in the state employing nearly 165,000 Missourians. To better illustrate the threat of joint employer, it’s important to understand the franchise model.
Think of a franchisor as a “simplifier” who takes an idea and distills it to the simplest, most cost-effective way for implementation. The franchisor creates a concept and identity, protects its branding, creates systems to reduce waste and costs.
Yet most franchisors do not excel at managing hundreds of their own locations. That is where the “multiplier” – or a franchisee – comes in. A multiplier will take someone’s idea and replicate it repeatedly. They will find new locations, negotiate leases, hire staff, manage payroll and tax compliance – all toward the goal of increasing the franchisor’s brand.
The partnership works and yields economic opportunities for so many, but only when each party has the freedom to operate. Biden’s joint employer rule upends the equilibrium. It puts franchisors on the hook for managing the day-to-operations of franchisees. It shifts power away from locally owned and operated businesses and to big businesses and corporations, often located out of state, who are responsible for the employees of their franchised brands. It opens the door to costly lawsuits and litigation.
Under the Trump standard, locally owned and run businesses enjoy autonomy. They operate a functioning workplace free from meddling corporate overlords. That all disappears under the new joint employer rule.
The Biden Administration’s joint employer regulation creates uncertainty about the chain of command with multiple new bosses and incentivizes franchisors to either become overly involved with day-to-day operations or withdraw valuable support to minimize risk from new litigation.
Franchising is small business and pro-worker, plain and simple. It creates endless opportunities for upward mobility, including many who start as employees and become franchise owners.
Under the previous expanded joint employer era, franchises lost $33.3 billion per year and hundreds of thousands of jobs were eliminated. In fact, expanded joint employer is so hostile to businesses that even California under Governor Gavin Newsom scrapped a version in his state.
Thankfully, bipartisan efforts are afoot to repeal expanded joint employer at the federal level. In January, the House of Representatives passed a resolution under the a law called the Congressional Review Act, which is one of the best tools for Congress to permanently overturn rules issued by federal agencies. Every Republican in the House, including in Missouri, recently voted to scrap the rule. In the Senate, the resolution enjoys the support of at least 45 Republican members, including Missouri Senator Eric Schmitt and several moderate Democrats.
I am hopeful that the Missouri delegation will stand up for small businesses and support the resolution to overturn the Biden Administration’s flawed joint employer rule when the Senate takes it up. Small businesses in Missouri’s franchise community need a permanent reprieve from the NLRB’s overregulation.
Co-founder of Keyser Enterprises, operates more than 50 multi-franchise operations throughout the Midwest with his brother Charles
