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The Save Local Business Act would preserve key American engines of economic and employment growth. Here’s how.
Updated September 9, 2022
As a part of AFP’s broad flexible work agenda and contained within the AFP endorsed Employee Rights Act, the Save Local Business Act would help ensure continued paths to success for many entrepreneurs and small businesses across America.
Introduced by U.S. Senator Roger Marshall (SB 1636) and U.S. Representative James Comer (HR 3185), the Save Local Business Act would put into law a permanent “joint employer” standard that protects rather than undermines small and local businesses using franchise and vendor models through which entrepreneurs employ millions of Americans.
The standard would apply to both the U.S. Department of Labor (USDOL) enforcing the Fair Labor Standards Act (FLSA) and the National Labor Relations Board (NLRB) enforcing the National Labor Relations Act (NLRA).
The key provision in the bill clarifies that:
“An employer may be considered a joint employer of the employees of another employer only if each employer directly, actually, and immediately, exercises significant control over the essential terms and conditions of employment of the employees of the other employer, such as hiring such employees, discharging such employees, determining the rate of pay and benefits of such employees, supervising such employees on a day-to-day basis, assigning such employees a work schedule, position, or task, or disciplining such employees.”
Spoken more plainly, many small businesses are formed by entrepreneurs under franchise models — think of local McDonald’s and Great Clips stores, for instance — or vendor models where businesses utilize other businesses to supply products or services such as manufacturers, temp agencies, and cleaning companies.
Franchisees open their own businesses and staff their own employees but utilize branding, products, promotional material and/or other beneficial products and services from franchisors to build their business while vendor companies provide services to other businesses, meeting the expectations of those businesses but managing themselves independently.
Joint employer rules are used to determine if more than one business has control over employees such that both act as employers.
The Save Local Business Act is important because it prevents entrepreneurs who wish to run independent businesses from falling under control of larger businesses, effectively ending their own businesses and turning someone in their position into merely a manager for other companies.
The reason the Save Local Business Act is needed is because the joint employer standard has been shifting based on current presidential administrations.
For instance, the Obama-era NLRB in 2015 issued a ruling in the Browning-Ferris Industries of California case that “indirect” control, and even reserving the right to control aspects without exercising them, was sufficient to deem a business a joint employer of employees that technically work for another business, such as a franchisees or vendors.
This standard jeopardized the livelihoods of many businesses and millions of workers.
Reasons for supporting a more restrictive standard like this include expanding the ability of unions to organize workers more broadly and the ability of agencies and courts to inflict more regulatory control and legal costs upon additional, larger businesses.
For instance, research indicated that the expanded joint employer standard under Browning-Ferris was adding over $33 billion in costs and 93% more lawsuits to franchises, reducing employment opportunities by 376,000 per year.
By instituting a stable, pro-entrepreneur joint employer standard, as the Save Local Business Act would do, American businesses could operate under new levels of certainty and would retain the flexibility that allows them to forge critical business relationships that serve as the lifeblood of numerous small businesses serving communities.
With over 750,000 franchises operating in the U.S. in 2020 and employing tens of millions of workers while representing trillions in sales annually, the impact of a positive joint employer standard would have an enormously positive effect on small businesses that also include even more businesses and workers relying upon vendor models.
Learn more about the reforms that would advance the freedom and flexibility workers need to thrive in today’s economy.