Washington Examiner: Do we all work for the federal government?

Published in the Washington Examiner
November 6, 2023
by F. Vincent Vernuccio

The National Labor Relations Board‘s immediate target is franchising, the business model in
which a larger “franchiser” enables a small business (the “franchisee”) to use its brand.
Restaurants, hotels, healthcare companies, and dozens of other industries use this model,
which makes it easier for entrepreneurs to start a small business. The larger company sets
broad standards so every franchisee has a uniform feel, while the franchisee owners maintain
direct control of workers and run their business. This time-tested arrangement spurs
entrepreneurship and opportunity nationwide.

Unions have long wanted to organize the larger companies, yet historically, they had to do so
at each franchisee — a costly and time-consuming process. They would much prefer to
organize one company instead of hundreds or tens of thousands of smaller businesses. Enter
the NLRB.

Stacked with union-friendly appointees by President Joe Biden, the NLRB has declared that
larger companies are “joint employers” with their franchisees. They can now be held liable for
a franchisee’s employment policies and labor relations, even though they exercise no direct
control over workers — i.e., hiring, firing, day-to-day duties, and so on. That’s an untenable
situation. No company wants to be sued for something it can’t change. The larger companies
are more likely to abandon franchising in favor of corporate-owned stores. That means far
fewer small businesses, which is what unions want, since it means fewer employers to
bargain with.

But the NLRB rule has no limiting principle. It declares that larger companies are joint
employers when they exercise “indirect control” over workers. Most notably, the NLRB defines
indirect control to include the setting of wage scales, hours of work and scheduling, and
working conditions. Larger companies can set broad standards for all these things at
franchisees. But then so can another institution: The federal government, and It has power
over the entire economy.

Washington, D.C., clearly exercises “indirect control” over workers’ wages. It’s called the
minimum wage. So too does Washington indirectly dictate workers’ hours and schedules —
see overtime rules. And our nation’s capital is also indirectly determining working conditions.
Look no further than the Occupational Safety and Health Administration, to say nothing of
the Department of Labor, which is even proposing a new overtime rule now.

Under the NLRB’s reasoning, the federal government is a joint employer of all workers
covered by these laws. It even says that joint employers include those who exercise “reserved
control” — i.e., they don’t set standards, but they have the power to do so. That expands the
definition of joint employer even more. Congress has the power to draft legislation affecting
essentially any part of the economy. As such, it reserves the right to set standards for all
workers, making the federal government a joint employer of anyone and everyone.

It’s highly unlikely that unions or the NLRB will try to apply the new rule in this way, since it’s
clearly beyond the pale. (Imagine Department of Labor officials bargaining with union
officials over the future of workers at your mechanic, along with almost every other business
you’ve ever patronized.) Yet if it’s wrong to say that Washington, D.C., is a joint employer over
the economy’s workers, it’s equally wrong to make that claim about larger companies and
the workers at their independent franchisees. It defies logic — and will injure millions of small
businesses and their workers.

F. Vincent Vernuccio is president of the Institute for the American Worker.