Restaurant Industry

NLRB puts thousands of small businesses, franchises at risk

Need convincing that the National Labor Relations Board is an agency in desperate need of a management change?

The NLRB, which ostensibly is charged with protecting workers’ rights and remedying unfair labor practices, has morphed into an arm of organized labor.

Consider the board’s hit parade of the last few years: There was the case against Boeing over the company’s decision to locate a new factory in right-to-work South Carolina; the Obama administration’s abuse of recess appointments to name a union sympathizer to the agency’s general counsel post; its obsession with card check, which would end workers’ right to a secret ballot in union elections; calling on employers to post notices about employees’ rights to join a union; and the pursuit of so-called snap elections, a way of ambushing employers with union elections before they can communicate their side of the argument to employees.

But now there’s another dubious distinction to add to the list, and the NLRB’s latest adventure has the potential to completely upend decades of the franchise restaurant business model.

In a late July determination, the NLRB found that McDonald’s Corp. could be treated as a joint employer with its franchisees in labor disputes. In other words, to the labor board, there is no daylight between the corporate parent and the franchisee operating his or her own restaurant.

The finding is not only potentially devastating to the restaurant industry, but to other businesses that rely on the franchisor-franchisee relationship, which affects many small businesses. It could also affect businesses that use subcontractors or temp agencies.

Organized labor, which has long sought to unionize the fast-food industry, but that has seen its influence in the private sector on the wane, hopes the NLRB decision opens the door to union organizing in these restaurants. If there’s no difference between McDonald’s corporate and the franchisee at your neighborhood outlet the thinking goes, then unions might have new leverage to negotiate over organizing and higher minimum wages because they can pressure one corporate entity rather than hundreds of small businesses.

This is bigger than a minor administrative filing by an obscure agency within the federal government. Thousands of jobs are a stake here. More regulations and mandates inflicted on small businesses make hiring more expensive and investment more elusive. Entrepreneurs who take the risk to open a new restaurant, whether an established franchised brand or an exciting new concept, face plenty of obstacles without the government throwing up new barriers to entry. If these small businesses can’t get off the ground, they can’t hire, which will only hobble the economy, not help it.

The decision will be appealed and could even end up before the Supreme Court. This is far from over.
What is unlikely to cease, unfortunately, is this administration’s seemingly endless desire to insert itself into the employer-employee relationship. In its apparent desire to help workers, the government is doing far more harm than good for the individuals it claims to protect.

Glenn Hamer is the president and CEO of the Arizona Chamber of Commerce and Industry. Steve Chucri is the president and CEO of the Arizona Restaurant Association and supervisor for Maricopa County District 2.

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