Protect Franchisees and Small Businesses

Author: Rachel Greszler, Senior Research Fellow

Affordability 101 · Chapter 3: Freedom to Work and Enterprise

Plymouth Institute for Free Enterprise

Topline

Congress should end regulatory flip-flopping and codify the rights of franchisees and small businesses to manage their employees and operations free from corporate control.

Background

Federal labor law covers situations when workers have two bosses—so-called “joint employers.” Despite the longstanding common-law practice of joint employer determinations based on whether an employer exercises direct control over a worker, the definition of a “joint employer” under the National Labor Relations Board has changed four times over the past decade. Expanded definitions that make corporations liable for small business employees they don’t control can compel them to impose control over those workers and the small businesses’ operations. Changing definitions creates uncertainty that stalls growth. Expanded joint-employer definitions threaten jobs, incomes, and the entire franchise, subcontractor, and staffing-agency models.

Action Items (Congress)

• Codify the definition of a joint employer, consistent across all federal law, based on the potential employer exercising direct, actual, and immediate control over the essential terms and conditions of employment.
• While consistency for all employers is ideal, Congress should protect the franchise model by codifying the definition of a joint employer within franchisor-franchisee relationships based on whether the potential employer exercises substantial direct and immediate control over the essential terms of employment.

How It Would Make Life More Affordable

• Franchises, subcontractors, and staffing agencies expand employment and incomes and provide unique efficiencies that lower costs.
• Franchising provides a proven model for Americans to own their own businesses—one that’s enabled more than 230,000 franchise owners to employ nearly 9 million workers.
• Whereas expanded joint-employer standards cost jobs and threaten the entire franchise model, permanent clarity and protection for franchises would allow entrepreneurship, jobs, and incomes to grow.

Related Legislation: Save Local Businesses Act (H.R. 4366); The American Franchise Act (H.R. 5267, S. 3525).

Bottomline

Congress should protect jobs, rising incomes, entrepreneurship, and affordable products and services by permanently protecting small businesses and their workers from unwanted corporate control.

This memo is part of Affordability 101, Advancing American Freedom’s playbook of 101 policy solutions to make life more affordable.

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