Even during a highly polarizing election year, areas of agreement and consensus are possible, especially when it comes to common sense economic principles. Inflation may have eased from its recent highs but concerns about the economy remain paramount for most Americans. A recent Associated Pres/NORC Center poll showed 76 percent of voters identify the economy as their top issue.
One major influence on our economic well-being is labor policy. At its best, good national labor policy protects workers and employers by providing clear and mutually beneficial standards. At its worst, misguided labor policy throws a wet blanket on either employers or employees, undermining progress, and hurting the economy. One of the great myths in American politics is that a law must be either pro-labor or pro-business, when in fact, it can and should be both. To find a reasonable compromise, both sides must accept that they will not get everything they want.
The introduction of new one-sided labor laws after every election has created instability for both employers and American workers. One example is the recent “Joint Employer Rule” unveiled by the National Labor Relations Board (NLRB) last October. This rule will make an upstream corporation (for example, a fast-food brand) responsible for the employees of the franchised business (that is, the locally owned fast-food restaurant) even though the upstream company generally has no “direct or immediate control” over those employees. By removing autonomy from franchisees, the new rule creates a confusing environment for the business and workers and will make companies who might otherwise be interested in franchising their brands think twice.
This rule is the Biden Administration’s attempt to undo the rule the Trump Administration put in that undid the rule the Obama Administration put in. See the problem? The partisan back and forth creates a whipsaw effect, and workers pays the price.
The NLRB should work with business interests and labor interests to find a solution that is good for employers and employees alike. The franchise business model has been very successful for decades so there has to be a better path forward. Small businesses account for almost half (44%) of all economic activity. We need national policies that encourage local business ownership and small business entrepreneurship while protecting employees at the same time.
Fortunately, Senators Joe Manchin (D-WV) and Bill Cassidy (R-LA) have introduced a Congressional Review Act (CRA), which allows Congress to review, and potentially overturn, federal regulations such as this decision. The CRA gives the Congress a final say, and that is why small business owners, especially those holding franchises, should ask their Senators and Representatives to support using the CRA to strike down this harmful rule.
Senators Manchin and Cassidy come from different political parties, but they are willing to work with each other on this important issue. They have no doubt heard concerns from business leaders and workers alike concerned about the impact of this rule taking effect. According to recent analysis from Oxford Economics, 70% of franchisees are bracing for increased litigation and higher costs, while 66% believe the new standard will raise barriers to entry into the franchising sector.
The CRA is one of the most effective ways for Congress to curb poorly thought out or unnecessary regulation It was encouraging to see the measure pass the House of Representatives in a bipartisan manner.
Now the action shifts to the Senate. Some of our Democratic friends no doubt wonder about the impact of this joint employer rule on the ability for workers to form a union. Collective bargaining is important, and possible within the franchising model. But this version of the joint employer rule would imperil the franchising model writ large. Many franchises enjoy higher rates of business ownership among people of color. Harmful regulations also impede opportunities to build and sustain generational wealth for their family-owned businesses.
Economic security and good-paying jobs know no party affiliation. They are equally important to all Americans, regardless of political or industry label. The current standard of joint employer based on direct control strikes the right balance between the interests of businesses, their partners and workers, and so it is an opportune time for the Senate to pass the CRA and provide the economy certainty on this issue.