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Republicans Introduce Bill To Reverse NLRB’s Far-Reaching New Franchise Rule

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Republican lawmakers have introduced a bill Wednesday in an attempt to reverse a new policy that some have argued severely hurts thousands of small businesses.

The new policy was made in response to a federal labor case involving Browning-Ferris Industries. The case has allowed the National Labor Relations Board (NLRB) to expand a critical franchising and contracting rule. Known as the joint-employer standard, the rule normally helps establish which company has responsibility over employees when multiple companies contract with one another.

“The board’s effort to redefine the idea of what it means to be an employer will wreak havoc on families and small businesses across the country,” Republican Sen. Lamar Alexander and Rep. John Kline said in a joint-statement. “Our commonsense proposal would restore policies in place long before the NLRB’s radical decision, the very same policies that served workers, employers, and consumers well for decades.”

Sen. Alexander and Rep. Kline both chair committees that deal with labor issues. The two are among a group of Republican lawmakers who have expressed concern over NLRB overreach under President Barack Obama. The NLRB, however, has defended the changes by arguing that franchisors often times have too much control over the independent franchisees they contract with.

“In this decision, we consider whether the board should adhere to its current standard for assessing joint-employer status under the National Labor Relations Act or whether that standard should be revise to better effectuate the purposes of the act, in the current economic landscape,” the NLRB decision noted.

Franchising is a unique form of contracting. It allows a small business to contract with a large corporation, like McDonald’s, so that it can to use its brand name and sell its products. Though the small company has to accept its own risk, it gets to run its business the way it wants. This while having the backing of the parents company.

“Changing the joint-employer standard will impede franchising by taking away the benefits of a small entrepreneur being able to start a small business and grow it using a brand name that was established by a major corporation,” Republican Sen. Johnny Isakson said in a statement. “If you take away incentives for corporations to franchise, the results will be similar to what we have already seen in so many oversteps by the Obama administration and the NLRB.”

Many business coalitions and policy groups have been petitioning Congress to stop the rule change. The libertarian Competitive Enterprise Institute (CEI), International Franchise Association (IFA) and the Coalition to Save Local Businesses among others have been at the forefront of fighting the policy.

“With the introduction of a bill to restore the traditional joint-employer standard, Congress has the chance to return stability and flexibility to thousands of business relationships and employment arrangements across the country,” CEI labor expert Trey Kovacs said in a statement. “If Congress fails to intervene, the NLRB decision could potentially stunt the growth of many small businesses.”

A CEI report from back in June says the changes are likely just an attempt to benefit labor unions. Unions would otherwise have to organize employees at each individual company within a single franchise, as opposes to organizing all employees at once within the same franchise.

“The NLRB has overreached and put the future of franchising in jeopardy with the stroke of a pen,” IFA President Steve Caldeira noted in a statement. “We applaud Chairmen Alexander and Rep. Kline for their collective efforts to overturn this ruling.”

Even though Republican members of Congress have already shown an intent to intervene, they face major challenges. Obama has successfully prevented lawmakers from stopping the NLRB in previous decisions. In March, Senate and House Republicans voted on a resolution to overturn a new union election rule from the NLRB. The president, however, was quick to veto it.

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