Franchise Owners Deserve A Break Today From The Labor Board
On Thursday, the Senate Committee on Health, Education, Labor and Pensions held a hearing on the National Labor Relations Board’s Christmas power grab.
For those who missed it, NLRB General Counsel Richard Griffin announced in December that he had issued complaints against McDonald's franchised restaurants and McDonald's parent corporation as joint employers. The NLRB is charging McDonald’s USA and some 86 franchises (less than half of one percent of all McDonald’s 14,000 locations) with unfair labor practices in hearings in March.
This joint employment designation is unprecedented, and overturns decades of law. For half a century, the local franchise was considered the only employer, because NLRB defined employers as those who controlled workers' "essential terms of employment," namely hiring, wage rates, firing, and job description.
The recent NLRB decision has changed that for McDonald’s. That has left other companies that use a franchise system asking whether their firms will be next.
The Senate hearing was entitled “Who’s the Boss? The Joint Employer Standard and Business Ownership.” Testifying were two lawyers and two franchise owners, John Sims IV, owner/operator of Rainbow Station at the Boulders, Virginia, and Gerald Moore, who owns five Little Gym Franchises in Tennessee, South Carolina, and North Carolina.
Sims, the owner of a Rainbow Station child care and early education center franchise, testified, “I am extremely troubled by recent events at the National Labor Relations Board related to the joint employer standard. I believe that unelected government officials are inventing a new definition of ‘joint employer’ that may threaten the livelihoods of local business owners like me.”
Sims explained that Rainbow Station provided the trademarks, logos, curriculum, and marketing materials, but he made the decisions as to whom to hire and what to charge. “If the Labor Board radically changes the joint employer standard, I fear that my days as an autonomous business owner will be numbered. If my liabilities extend back to Rainbow Station as the franchisor, I have to assume that they are going to want a role in managing risks and protecting against those liabilities…My freedom and autonomy will vanish.”
The NLRB's decision is cataclysmic for McDonald’s, and any other franchises, such as Rainbow Station, to which the new rule is applied. If McDonald’s is considered a joint employer, and sets terms of hiring, then the value of a franchise business is reduced. Employers are entrepreneurs, and they don’t want McDonald’s USA — or Rainbow Station — to be a joint employer.
Gerald Moore testified that he owns the locations of his Little Gym franchises, experimental learning centers that offer children’s physical and educational programs, with his wife and two children. A former school teacher, Moore volunteered for the Army during Vietnam and won a meritorious service medal.
Moore said, “If franchisors are now on the hook for the liabilities of their franchisees, upstart entrepreneurs with limited assets will be passed over for well-established franchisees that can better protect the ‘deep pockets’ of the franchisors … The joint employer standard will put the brakes on what looks like a banner year of accelerated growth and job creation in the franchise sector.”
The whole point of this is that the NLRB wants to make it easier for unions to organize McDonald’s and other franchises. On June 26, 2014, Griffin stated in an amicus brief in another case that "the Board should abandon its existing joint-employer standard because it undermines the fundamental policy of the Act to encourage stable and meaningful collective bargaining."
The Senate committee hearing provides a useful window into how the NLRB will affect the livelihoods of franchisees such as Gerald Moore and John Sims. Let’s hope Congress restrains the NLRB before it wrecks the U.S. system of franchised business.
This piece originally appeared in Washington Examiner
This piece originally appeared in Washington Examiner