With the buzz of the holidays, the government shutdown and a presidential address, you may have missed that one of the most important efforts of the Trump Administration is finally coming to fruition. This effort, once completed, will provide much needed legal clarity and relief to one of the biggest job-creators in the country – the franchise industry.
Considering the sheer volume of franchises we encounter on a daily basis (McDonald’s, Seven Eleven, Ace Hardware etc.), it probably comes as no surprise that the franchise industry is massive. According to the International Franchise Association, there roughly 733,000 franchise establishments in the U.S., employing over 7.3 million people and contributing $404 billion to the U.S. economy.
What makes franchises special is that, despite the ubiquity of the brands themselves, the establishments we patronize are locally owned and operated. So, every time you stop by the golden arches for a Big Mac, your money isn’t being swallowed up by some faceless multinational – it’s supporting entrepreneurs in your own community.
That’s why it’s essential that government policy makes it easier for local franchisees to do business so that they can create more jobs and grow our economy. However, over the last several years – thanks to Obama-era bureaucrats and liberal judges – the government has introduced uncertainty for franchisees, which could stymie future job growth.
It started back in 2015 when the liberal-controlled NLRB passed a rule that classified franchises as “joint employers,” meaning both the local franchise owner and the national franchiser were classified as employers under a vague set of rules.
Though the Obama Administration billed it as a way to protect franchise workers, this rule was really just a win for Big Labor interests like the SEIU, because it would make it easier for them to unionize workers. Then the unions could collect more dues and pump more money into their Democratic political machines.
Thankfully, President Trump appointed new members to the Board who immediately moved to reverse this damaging rule. But Big Labor and its allies didn’t go down without a fight, with court battles leaving the fate of the rule uncertain, and leaving local franchisees caught in the crossfire.
This uncertainty should finally be coming to an end soon, as President Trump’s NLRB proposed a rule last September which would ensure that local franchise owners are rightfully declared as the true employers, making it easier to do business. Further, it shields the national franchisors from burdensome, frivolous litigation by Big Labor over local issues.
The NLRB extended the public comment period for this rule twice due to the massive influx of comments, which shows just how important this issue is to so many business owners across the country.
But Big Labor has been flooding the zone with misleading and false information to try and derail the new rule. For example, Big Labor has claimed that the new rule is a departure from decades of legal precedent that the Obama-era rule upheld. This couldn’t be further from the truth; for years, it was always understood that local franchisees were the sole employers. It was the Obama-era rule that upended precedent and introduced confusion into a once-stable relationship between franchisee and franchisor.
Another justification that Labor cited as reasons to oppose the new rule is that the number of temporary workers has been increasing, and therefore needs better union representation. This, too, is false. The Bureau of Labor Statistics recently released data showing that the number of temporary workers has decreased from 4.1 percent of the workforce in 2005 to 3.8% today.
This behavior isn’t surprising, because Big Labor has been seeing its power slip for decades as business owners have been given more freedom to operate than ever. Their efforts will be in vain, however, as long as the NLRB finishes the job a puts the proposed rule into effect.
Franchises are some of the most important drivers of growth in the American economy, and it’s encouraging that President Trump’s efforts to end the “joint employer” rule are coming to fruition. However, Big Labor is unlikely to give up the fight for more power over franchises, which is why we should all continue to stand by our local franchise owners and their champions in government.