Prior to Aug. 27, the definition of a joint employer meant two or more companies must have exercised “direct operational and supervisory control over an employee,” the IFA said. Under this new interpretation, the NLRB is applying a broader “economic realities” test to include “indirect control” or even “potential, unexercised control,” the IFA said.
Auto industry impact
With the automotive service landscape peppered with franchise operations, the NLRB ruling is leaving doubt and concern in its wake.
The NLRB decision will be disastrous among franchisors in the auto service sector, according to Josh Wall, vice president of franchise and strategic development for Houston-based Christian Brothers Automotive Corp.
“We feel the NLRB upholding their original decision is disappointing and will create a material negative effect on those people and families that chose to take a risk, make an investment in themselves and become our franchisees,” Mr. Wall told Tire Business.
“The NLRB decision has the opportunity to strip those business owners (franchisees) of much of their independence and essentially penalizes as entrepreneurs,” he said. “We are disappointed with the NLRB's decision, but will continue to press forward to serve our franchisees and think through what, if any, further action we need to take at this time.”
The NLRB decision is a particular victory for trial lawyers, according to Ms. Milito.
“Now they can sue subcontractors and the larger firms who hire them,” she said. “They've got deeper pockets to go after.”
Subcontractors are hurt just as badly by the NLRB decision as franchisees, Ms. Milito said.
“Many thousands of Americans make a living as subcontractors, and this is a direct threat to them,” she said. “They want the independence that comes with being their own boss, and they want the potential for growth. All of that goes away if there's no longer any regulatory or financial advantages in hiring subcontractors.”
The changes to the joint employer standard also could impose new collective bargaining obligations and allow unions the ability to strike or picket a large entity as opposed to the location where there is a dispute, the IFA contends, and also would increase the likelihood of union “campaigns” against national businesses, while forcing small businesses to become engaged in protracted, unnecessary and costly legal battles.
Congressional action sought
IFA has been working with the Coalition to Save Local Businesses (CSLB) to inform members of Congress about the potentially devastating economic impact that redefining the joint employer standard would have on franchised businesses and the U.S. economy overall.
As part of its involvement with the coalition, the IFA planned to ask members of Congress to support legislation that would codify the decades-long and widely accepted definition of what constitutes a joint employer.
The IFA's Mr. Caldeira called the decision “a seismic shift in the board's employer definition and, without any Congressional or court action, could significantly alter the face of American business as we know it.
“If allowed to go into effect,” he added, “the impact…would be sweeping and widespread, create havoc for the franchise industry and, ultimately, would inflict serious damage to our nation's economy.”
The NFIB said Sept. 10 it's supporting House and Senate bills introduced recently — Protecting Local Business Opportunity Act — that would clarify and affirm that a business must have "actual, direct and immediate" control over an employee to be considered a joint employer.
The legislation was introduced in the Senate by Sens. Lamar Alexander, R-Tenn., and John Isakson, R-Ga., and Representatives John Kline, R-Minn., and Phil Roe, R-Texas.
Washington-based IFA claims to work through its government relations and public policy, media relations and educational programs to “protect, enhance and promote franchising” and the more than 780,000 franchise establishments that support nearly 8.9 million direct jobs. The IFA estimates franchising represents $890 billion of economic output for the U.S. economy and 3 percent of the gross domestic product.
In addition to Christian Brothers, other auto service franchisors among the IFA's 1,800-plus member companies include: Auto-Lab Complete Car Care Centers; Express Oil Change & Tire Engineers; Honest-1 Car Care; Merlin 200,000 Mile Shops; Mighty Distribution System; Milex Complete Auto Care; RNR Tire Express & Custom Wheels; Rimtyme Custom Wheels & Tires; TBC Corp.'s Big O Tires L.L.C. and Midas International units; and Tuffy Auto Service Centers.
National Automotive Parts Association (NAPA) Genuine Parts Co. declined to comment to Tire Business for this story, as did officials of TBC. Representatives of other companies operating franchise programs were not available for comment.
Bridgestone Retail Operations urged mindfulness in reviewing contractual relationships and managing the workforce in the light of the NLRB's decision.
In as statement, Bridgestone said it supports and facilitates its product sales in the U.S. through a nationwide dealer network, as well as through more than 2,200 company-owned tire and auto service centers.
“Conducting business within these two distinct operational models, we are mindful of decisions like the one recently issued by the NLRB,” the company said.
“It serves as a reminder of the importance of reviewing and updating contractual relationships with our business partners as well as our own policies and procedures for managing our workforce,” it said.
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To reach this reporter: [email protected]. Some information in this story came from a report by Business Insurance magazine, a Chicago-based sister publication of Tire Business. Bruce Davis, Tire Business reporter, contributed to this report.
