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Washington is a city built on virtue signaling and hypocrisy. Recently, the biggest wrongdoer has been none apart from the White House itself. President Biden said all of it correct things during Small Business Week, but his actions on a key issue affecting tens of millions of small businesses told a very different story.
With the presidency on May 3 veto bipartisan resolution on the Congressional Review Act (CRA) that might repeal the expansion of the joint employer rule, the Biden administration has shown it cares more about special interests than small business owners who face an onslaught of costs and uncertainty from constant regulatory onslaught . Incredibly, the president’s veto message made no mention of the impending harm to the franchise model, a stunning oversight of the small business community whose future hangs in the balance – as evidenced by recent petition over 5,300 franchise stakeholders who called on the White House to sign the bill.
Extended rule
The subject of dialogue is the expanded joint employer rule announced by National Labor Relations Board (NLRB) last October. This rule threatens to upend the relationship between franchisors (branded firms like McDonald’s, Anytime Fitness and Dunkin’) and individual franchisees (the local small business owner who runs the facility). Under the previous 2020 standard, a company could only be considered a joint employer if it exercised “direct and immediate control” over the employees’ employment. Under the recent prolonged rule, a company with only vague control rights shall be considered a joint employer.
The recent threshold is a much lower bar to cross, and this is what motivates its supporters. Joint employers have a duty to barter the substantive working conditions of their employees while being liable for unfair labor practices of the other joint employer. This rule adds uncertainty to a business community still finding its footing after the pandemic.
Negative consequences
If this rule comes into force, it should have negative consequences for each entrepreneurs and employees. Franchisors are willing to extend their oversight of local businesses to cut back legal risk. Or they may withdraw resources completely and let their franchisees fend for themselves. Worse yet, many people may select to not expand through franchising, closing the door to business opportunities for 1000’s of potential entrepreneurs. None is a positive consequence.
Meanwhile, employees find themselves in a state of uncertainty in the face of competing bosses and unclear lines of authority. It jogs my memory of a movie Office space, when a mid-level worker laments one of the consultants brought in to enhance performance: “I have eight different bosses straight away. This signifies that when I make a mistake, eight different people come to me and tell me about it. “
Franchising provides an entry point into entrepreneurship for minority- and women-owned businesses, and evidence shows that minority-owned franchises are some of the most profitable ventures. Indeed, Oxford Economics discovered this almost one third (32%) franchise owners wouldn’t be in business without a franchise, and greater than twice as many franchise owners are minority-owned in comparison with non-franchise owners. Black-owned franchises earn, on average, greater than double their equivalents in non-franchise businesses, which makes owning a franchise an attractive technique to create generational wealth.
‘High Concern’
Given the increased uncertainty, potentially unlimited liability and risk of litigation, it’s no surprise that 74% of franchisors expressed great concern about the recent Common Employer Standard, based on data collected by the International Franchise Association 2024 Franchisor Survey. For many of those people, the threat is not hypothetical. They survived the previous iteration and experienced devastating consequences.
During the last joint employer expansion in 2015, franchise firms lost out $33 billion annually – based on data from Oxford Economics. About 376,000 franchising jobs were never established as a result of their use for legal fees and compliance costs, and the variety of lawsuits against franchises has doubled.
Meanwhile, expanding the joint employer rule will limit opportunities and widen the racial wealth gap that candidate Biden has promised to deal with. It also comes as disturbing recent data shows that just about 17% of Black mortgage applicants in the U.S. shall be denied in 2022 in comparison with 6.7% of white people, based on the latest data Consumer Financial Protection Bureau. Franchising and home ownership are two key ingredients to building generational wealth.
NLRB appeal
Federal court recently hit rejected the expanded joint employer rule, but the NLRB appealed the ruling, meaning the expanded rule should still apply.
While the IFA is confident about our legal position, Biden’s signature to the CRA would offer some sense of lasting relief. It would also help his political standing. A recent CNN poll shows this 70 percent voters have a negative view of the economy, the Biden administration also needs a victory.
Trade union bosses profit
The only groups benefiting from the expanded joint employer are work bosses — and not to learn employees, but to expand their ranks and political power. While Biden veto message he didn’t mention small businesses, he took the time to declare himself the “most pro-EU” president in history.
The president’s actions on the joint employer have revealed his priorities, and they are not in line with the small business community that his administration controls taken over rejoice. This motion shall be remembered in the face of the upcoming elections, especially if the president intends to stop the campaign of his favorite ice-cream Or sandwich shops.
Matt Haller is the company’s president and CEO International Franchise Association