Labor Force / National Labor Relations Board / Politics / U.S. Domestic Policy

The American Franchise at Risk

On September 13th the House subcommittee on Worker Protection and the subcommittee on Health, Employment, Labor, and Pensions held a congressional joint hearing to consider the Save Local Business Act. The proposed bill seeks to define joint employers as those who have “actual, direct, and immediate control” over employees and to roll back the Obama era joint employer standard.  The Save Local Business Act marks a bipartisan effort to provide clarity in an otherwise vague understanding of joint employer legislation. Two small business owners Granger MacDonald, CEO of MacDonald Companies and Tamra Kennedy, Franchisee of several Taco John’s (TJ’s), testified in support of the bill.

President Obama’s National Labor Relations Board changed the previous understanding of a joint employer from a standard of “direct and immediate” control to one of “indirect” control under its 2015 Browning-Ferris decision. By broadening the definition and scope of what constitutes a joint employer, the government is narrowing the field of choices, limiting individual autonomy, and slowing economic growth. The joint employer standard, according to the Obama era understanding, specifically threatens the success and future existence of the franchise model, which Kennedy called a “true quintessential American product.”

There is no reason to demand that the current owner of a franchise relinquish his autonomy and responsibility over his employees – those whom he has hired, paid and in some cases even mentored. The joint employer standard diminishes the work and ownership of the franchisee and undermines the foundational principles that make the franchise model and the country successful. The Save Local Business Act seeks to uphold the American traditions of free association, the protection of property, and the pursuit of happiness as each individual understand it. The proposed legislation would provide clarity by returning to the original understanding of what constitutes an employer, thereby protecting the franchisee’s right to physical property as well as his or her own labor. The state is not charged with the explicit protection of each individual nor is it responsible for guiding his decisions; rather it exists to protect the freedom that allows said individual to pursue his understanding of the good. By placing restrictions on individuals’ ability to choose, the government is hindering the individual’s ability to provide for himself and by extension provide for others including family and the community. And when a person has sufficiently mixed his labor they are able to acquire that which, through their own work, they made their own. This classical Liberal understanding of property and the role of the state are perfectly compatible with the idea of the franchise, which is why this model has been so successful in this country. At its most basic level, the franchise is merely a free association between two persons to produce beyond the capabilities of an individual. The franchisee is able to begin their own product in their immediate community, providing jobs, and support to those he knows and cares about. Many of these franchises like TJ’s provide systems of support for their employees to become independent owners; Kennedy herself rose through the ranks before becoming a franchisee.

Under the Obama era joint-employer standard, those industrious and rational[i] persons, like Tamra Kennedy, must always remain subservient and bound to the franchiser, who would be compelled under this legislation to seize the labor, property, and employees of the franchisee. Additionally, Kennedy and others are hesitating to expand their businesses due to the joint employer standard. According to the American Action Forum, continuing to abide by the Obama era standard could result in the loss of 1.7 million jobs in the private sector.

One would be hard-pressed to find a country where the franchise model has succeeded to the degree that it has in the United States. If the current joint employer standard continues to be enforced, the unique nature of the franchisee-franchiser and employee-employer dynamics will cease to be distinct from one another.  As Rep. Bradley Byrne, Chairman of the subcommittee on Workforce Protection, pointed out, the quarrelsome and contentious environment surrounding this proposed legislation “is a game” and the players are people like Tamra Kennedy and her employees pushing back against disgruntled union attempts to regain the power and influence they once had. In an attempt to reclaim the political stage, unions have become the bill’s most vocal opponent claiming that this bill inhibits collective bargaining. The reality is that the Save Local Business Act would streamline bargaining by clearly identifying who workers are employed by and would negotiate with, without unnecessarily bringing in more parties that would complicate any instances of negotiation. The Save Local Business Act seeks to protect the American franchise from unnecessary government encroachment as well as union intervention by returning to a common sense understanding of the employer and the protection of individual’s freedom of association, choice, and, conception of good.

[i] Locke, John. Ch. 5: On Property, Sec. 34. Second Treatise on Government.

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