WASHINGTON—A National Labor Relations Board (NLRB) decision designating nameplate companies to be joint employers with their franchisees and subcontractors continues to draw negative comment from both franchise operations, including some auto service providers, and the associations that represent them.
“There are tens of thousands of brand-name businesses, like fast food restaurants, that are actually small businesses,” said Beth Milito, senior legal counsel for the National Federation of Independent Business (NFIB), regarding the NLRB's 3-2 decision on Aug. 27 in a labor dispute involving Browning Ferris Industries (BFI) of California Inc. and one of its subcontractors, Leadpoint Business Services.
Also weighing in on the NLRB's ruling on joint employer status was the International Franchise Association (IFA), which said the decision “jeopardizes...the future viability of the franchise model of doing business” and threatens millions of jobs at franchised businesses.
“While Congress is away, the NLRB clearly still plays,” said IFA President and CEO Steve Caldeira, referring to the ruling stating BFI was a joint employer with Leadpoint, a company that supplied employees to BFI to perform various work functions, such as the cleaning and sorting of recycled products.
The IFA claims the NRLB decision in favor of a petition filed by the International Brotherhood of Teamsters union “satisfied the politically motivated requests of organized labor and manufactured a new joint employer standard that small businesses have long been bracing for.
“In doing so, the (NLRB) board ignored decades of judicial precedent and bipartisan policy agreement dating back to the Johnson Administration to invent new labor law. The Browning-Ferris decision is proof that the NLRB may target parties to any business contract in pursuit of their ideological agenda of promoting unions above all else,” Mr. Caldeira said.
“The ruling jeopardizes small employers in numerous sectors and the future viability of the franchise model of doing business, which has been a hallmark of economic growth and small business ownership opportunities for thousands of aspiring entrepreneurs. The ruling also threatens millions of jobs that franchises create across the country.”
The NFIB's Ms. Milito described franchises as being “owned and operated independently of the big corporations. “If those corporations are suddenly responsible for the franchise employees, they'll be forced to exert more controls over the franchisees or eliminate the franchise model entirely and take direct control over the locations.”
The IFA contends the NLRB's “tortured analysis will undoubtedly be met with skepticism and will be rejected by local franchise owners, legislators and, ultimately, the courts,” Mr. Caldeira said.
The IFA and its allies are asking Congress to intervene to halt these “out-of-control, unelected Washington bureaucrats” to preserve the established joint employer standard relied upon by 780,000 franchise businesses in the U.S. and the estimated 8.5 million jobs they create.
According to long-established practice and law, local franchise owners control their own hiring practices, working conditions, wages and hours of operations and file their own taxes, the IFA pointed out. None of these decisions is controlled by the brand company, the association said. Instead, each local franchise business owner operates a separate company independent of the brand company.
However, the IFA continued, the NLRB's ruling means the board can consider factors unrelated to employees' condition of employment as indicative of “joint employment.”
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.
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.
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.”
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.
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.