Who’s the Boss? the ``Joint Employer’’ Standard, American Small Businesses and Employment Growthby Senator Lamar Alexander
Posted on 2015-02-09
ALEXANDER. Mr. President, I ask unanimous consent that a copy of
my remarks at the Senate Health, Education, Labor and Pensions
Committee hearing last week be printed in the Record.
There being no objection, the material was ordered to be printed in the Record, as follows: Who's the Boss? The ``Joint Employer'' Standard, American Small Businesses and Employment Growth This morning we are having a hearing about who qualifies as a joint employer in the National Labor Relations Board's view.
This hearing this morning is about a pending National Labor Relations Board decision that could destroy a small business opportunity for more than 700,000 Americans. These men and women are franchisees. They operate health clubs, barber shops, auto parts shops, child care centers, neighborhood restaurants, music stores, cleaning services, and much more. They use the brand name of companies like Planet Fitness, Merry Maids or Panera Bread. They may work 12 hours a day serving customers, meeting a payroll, dealing with government regulations, paying taxes, and trying to make a profit.
We live at a time when Democrats and Republicans bemoan the fact that it's getting harder and harder to climb the economic ladder of success in our country. Successfully operating a franchise business is today one of the most important ways to do that. Why would the pending decision by the National Labor Relations Board threaten this very American way of life, knocking the ladder out from under hundreds of thousands of Americans? The board and its General Counsel are pursuing a change to what is called the ``joint employer'' standard. This standard, or test, has since 1984 required that for a business to be considered a joint employer, it must hold direct control over the terms and conditions of a worker's employment--to decide that, the NLRB looks at who hires and fires, sets work hours, picks uniforms, issues directions to employees, determines compensation, handles day to day supervision, and conducts recordkeeping.
Under the changes the NLRB is now considering, it would take just indirect control over the employees' terms and conditions of employment, or even unexercised potential to control working conditions, or where ``industrial realities'' otherwise made it essential to meaningful collective bargaining.
So what could this mean for these more than 700,000 franchisees and employers? These franchise companies will find it much more practical to own all their stores and restaurants and day care centers themselves. There will be many more company-owned outposts, rather than franchisee- owned small businesses.
Franchisees tell me they expect ``franchisors would be compelled to try to establish control over staffing decisions and daily operations. . . . franchisees would lose their independence and become de facto employees of the franchisor.'' This case doesn't just affect franchisees, it will affect every business that uses a subcontractor or contracts out for any service.
[[Page S854]] That includes most of the 5.7 million businesses under NLRB jurisdiction in America--because most businesses contract for some service.
Consider a local bicycle shop that contracts out its cleaning service under a cost plus provision, in which the cleaner is paid for all of its expenses to a certain limit, plus a profit. If this arrangement is interpreted to create ``indirect control'' or have ``unexercised potential'' over working conditions--they could trigger joint employer obligations. Same thing with a local restaurant that outsources all of its baked goods under a contract that includes penalties for being late or delivering substandard goods--it could be considered a joint employer of the bakery employees.
What does it mean to be a joint employer? First, you are required to engage in collective bargaining, and are on the hook for all of the agreements made in collective bargaining, such as salaries, healthcare coverage, and pension obligations. It often takes weeks or months of an employer's time and hefty legal costs to negotiate agreements.
Being considered a joint employer also eliminates protection from what are called ``secondary boycotts.'' Current law does not allow a union to boycott companies that do business with their employer in an attempt to apply to pressure to their employer. If the secondary company is instead deemed a joint employer, the union will be able to picket and boycott.
Imagine being an employer and having these legal, financial and time burdens placed upon you by a union representing employees you have no real control over.
Let me give another example--we have several large auto manufacturing plants in my home state of Tennessee. Let's say one of those plants has a few thousand employees, but thousands of other workers come in and out of the plant's gates every day to provide goods and services the facility needs to operate.
These workers are employed and directly controlled by subcontractors that provide security, supply auto parts, and staff the company lunch room. If the NLRB goes down this road, the plant owner could be forced to sit at dozens of different collective bargaining tables--and be responsible for another employer's obligations.
So the manufacturer would likely take as much ``in house'' as it can--and if that move comes at the cost of efficiency and innovation the plant could be relocated elsewhere. This example is especially concerning to me because more than 100,000 Tennesseans are employed in the auto manufacturing industry.
As for the subcontractors, they would be losing huge clients, which would in turn jeopardize more jobs and threaten these businesses' futures.
Most business owners are people who wanted to run their own business, be their own boss, and live their dream of providing a much-needed service in their community.
This pending decision would ruin that dream for many.