A pro-union ruling by the National Labor Relations Board (NLRB) has depressed franchise hotel employment growth and brought down wages across the hotel industry, according to the American Action Forum (AAF).
The NLRB under former President Barack Obama issued a ruling in 2015 that expanded the definition of joint employer to apply to businesses or companies that have “direct or indirect” control over employees. The rule most affected franchisers who sell the right to open a franchise store to individuals or groups who then own the store.
The ruling overturned decades of precedent. A joint employer was considered to be two or more employers with “direct” control over employees’ hiring, firing and wages from 1984 until the 2015 ruling. (RELATED: Courts And NLRB Disagree On ‘Joint Employer’ Ruling)
Franchisers under the new ruling can be held liable for labor violations and the poor treatment of workers by franchisees, though in the franchise business model, franchisers have no direct control over workers, according to the AAF. The ruling also empowers unions by giving them access to collective bargaining with the corporate parent of a franchise, as well as the ownership of the unionized business.
The ruling has been detrimental to the hotel industry, which is roughly a third franchises, over the past three years. Hotel franchise employment growth slowed by 1.4 percent while non-franchise employment growth increased, according to the study reviewed by The Daily Caller News Foundation.
Average real wages and real weekly earnings stagnated from 2015 to 2017 in the hotel industry at large. Growth in the industry’s total wages declined by 3.9 percent in the same timeframe, according to the study.
“The NLRB’s broadened joint employer standard reversed decades-old precedent and is particularly consequential for the franchise business model,” AAF director of labor policy Ben Gitis, who authored the study, wrote. “The hotel industry is particularly vulnerable to the economic consequences of the new joint employer standard and two years of data indicate that franchise workers in the industry may already be paying the price.”
Republicans and franchised industries and businesses have widely criticized the Obama-era joint employer ruling and called for it to be vacated or overturned either by the NLRB or Congress.
Unions back the rule, however. The International Brotherhood of Teamsters (IBT) applauded an NLRB decision to reinstate the Obama-era joint employer rule after the labor board had vacated it for several months.
“We are pleased that the Board did the right thing and vacated a terrible decision that would have hurt workers now and in the future,” IBT local officer John Bouchard said in a statement. “We will continue to press forward to ensure that workers are protected and that employers are held responsible.”
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