Encouraging Entrepreneurship and Business Expansion

By at 7 November, 2017, 8:29 am

Small Business Policy Insider

By Karen Kerrigan-

November is National Entrepreneurship Month and more than just press releases and kind words by politicians about their love for startups and local businesses, entrepreneurs need real action on issues that encourage them to take risks and grow.

U.S. House members will have that opportunity on November 7, when the Save Local Business Act (H.R. 3441) hits the floor.

The bipartisan legislation fixes the vast harm and confusion created by the “joint employer” liability standard put into place by the National Labor Relations Board (NLRB) in August 2015.  The standard threatens local franchises and the franchising model, new business creation and all sorts of independent businesses across the nation.

The NLRB replaced the common sense and long-standing “direct and immediate control” standard on joint-employer liability with a vague and expansive “indirect” and “potential” control definition. Under the new standard, a joint employer is any business that exercises indirect, potential or even reserved control over the practices of another business and its employees.

This vague and expansive standard puts many small businesses at risk to a joint employer finding, exposing them to liability, new costs and loss of business control.

Naturally, small business owners are alarmed by this ambiguous standard. Many entrepreneurs who dream of franchising their business model have put their plans on hold until the standard reflects common sense and intelligibility.

SBE Council member Kristie Arslan, owner of Popped! Republic, has done extensive research on franchising her business.  But the joint employer standard is a major roadblock for her expansion dreams: “We just felt we could not take the risk right now, until we got some certainty around joint employer and the impact that it would have on our business,” as Kristie noted at an event when the bipartisan H.R. 3441 was announced.

H.R. 3441 provides a simple fix by amending the National Labor Relations Act (NLRA) and the Fair Labor Standards Act (FSLA) to clarify that two or more employers must have “actual, direct and immediate” control over employees in order to be considered joint employers. Simple enough.

This very straightforward bill to provide entrepreneurs with clarity ought to receive big bipartisan support.  But unfortunately, union groups have swooped in and are circulating irrational claims and bogus information about the legislation.

They claim H.R. 3441 rolls back worker protections and rights.  The legislation does not do that – it simply establishes a clear definition of joint employer in the NLRA and FLSA.

Union groups are also pedaling the falsehood that H.R. 3441 would “worsen” worker misclassification. However, joint employment and independent contractor status are two separate issues. The bill does not touch the independent contractor definition, and it does nothing to change the government’s work going after employers who knowingly misclassify employees as independent contractors.

The bill has no impact on worker retirement security as it relates to employer obligation to pay into a union pension fund. But that has not stopped the unions from making this false claim. ERISA governs federal pensions, and H.R. 3441 does not amend ERISA.  H.R. 3441 is a two-page bill that only provides clarity on the issue of joint employer liability.

Recently the Census Bureau reported that new business creation remains weak, with 414,000 new startups in 2015 versus the pre-recession annual average of 524,000. SBE Council research has found a gap of 3.4 million “missing” businesses in America.

The current joint employer standard undermines business independence and individual ownership.  The standard needs to be clarified to protect small and local businesses, encourage more entrepreneurship, and support entrepreneurs who want to franchise their small business.

Entrepreneurship needs a big boost.  Smart government policies are fundamental to creating a supportive ecosystem for startups and successful small business growth. Let’s make National Entrepreneurship Month more meaningful with the passage of H.R. 3441, the Save Local Business Act.

For more information about joint employer and the Save Local Business Act, visit the Coalition to Save Local Businesses here.

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council

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