Do you actually work for the federal government? Do all 166 million Americans in the workforce?
The National Labor Relations Board's immediate target is franchising, the business model in which a larger “franchiser” enables a small business (the “franchisee”) to use its brand. Restaurants, hotels, healthcare companies, and dozens of other industries use this model, which makes it easier for entrepreneurs to start a small business. The larger company sets broad standards so every franchisee has a uniform feel, while the franchisee owners maintain direct control of workers and run their business. This time-tested arrangement spurs entrepreneurship and opportunity nationwide.
Unions have long wanted to organize the larger companies, yet historically, they had to do so at each franchisee — a costly and time-consuming process. They would much prefer to organize one company instead of hundreds or tens of thousands of smaller businesses. Enter the NLRB.
Stacked with union-friendly appointees by President Joe Biden, the NLRB has declared that larger companies are “joint employers” with their franchisees. They can now be held liable for a franchisee’s employment policies and labor relations, even though they exercise no direct control over workers — i.e., hiring, firing, day-to-day duties, and so on. That’s an untenable situation. No company wants to be sued for something it can’t change. The larger companies are more likely to abandon franchising in favor of corporate-owned stores. That means far fewer small businesses, which is what unions want, since it means fewer employers to bargain with.
But the NLRB rule has no limiting principle. It declares that larger companies are joint employers when they exercise “indirect control” over workers. Most notably, the NLRB defines indirect control to include the setting of wage scales, hours of work and scheduling, and working conditions. Larger companies can set broad standards for all these things at franchisees. But then so can another institution: The federal government, and It has power over the entire economy.
Washington, D.C., clearly exercises “indirect control” over workers’ wages. It’s called the minimum wage. So too does Washington indirectly dictate workers’ hours and schedules — see overtime rules. And our nation’s capital is also indirectly determining working conditions. Look no further than the Occupational Safety and Health Administration, to say nothing of the Department of Labor, which is even proposing a new overtime rule now.
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Under the NLRB’s reasoning, the federal government is a joint employer of all workers covered by these laws. It even says that joint employers include those who exercise “reserved control” — i.e., they don’t set standards, but they have the power to do so. That expands the definition of joint employer even more. Congress has the power to draft legislation affecting essentially any part of the economy. As such, it reserves the right to set standards for all workers, making the federal government a joint employer of anyone and everyone.
It’s highly unlikely that unions or the NLRB will try to apply the new rule in this way, since it’s clearly beyond the pale. (Imagine Department of Labor officials bargaining with union officials over the future of workers at your mechanic, along with almost every other business you’ve ever patronized.) Yet if it’s wrong to say that Washington, D.C., is a joint employer over the economy’s workers, it’s equally wrong to make that claim about larger companies and the workers at their independent franchisees. It defies logic — and will injure millions of small businesses and their workers.
F. Vincent Vernuccio is president of the Institute for the American Worker.