SBE Council Comments on NLRB’s EXPANDED Joint Employer Standard: “We urge NLRB to withdraw the proposed standard and allow the 2020 rule to stand”

By SBE Council at 7 December, 2022, 4:05 pm

Comments on the NLRB Notice of Proposed Rulemaking:

Joint Employer Standard

The Honorable Lauren M. McFerran

Chairman

National Labor Relations Board

1015 Half Street S.E.

Washington, D.C. 20570-0001

RE: Docket NLRB-2022-0001

Standard for Determining Joint-Employer Status, 87 Fed. Reg. 54641 (Sept. 7, 2022)

VIA ELECTRONIC SUBMISSION

Dear Chairman McFerran:

The Small Business & Entrepreneurship Council (SBE Council) appreciates the opportunity to comment on the proposed National Labor Relations Board (NLRB) rulemaking on a new joint employer standard.

SBE Council is an advocacy, research and education organization dedicated to promoting entrepreneurship and protecting small business. For 28 years, our work has focused on strengthening policies and programs that encourage startup activity, small business growth, economic opportunity and resiliency through entrepreneurship. Much of our work focuses on modernizing rules and laws, lowering barriers and eradicating unnecessary red tape, and advancing policies that strengthen capital formation, investment, access to markets, and innovation.

The “direct and immediate control” joint employer standard is one that the NLRB had used for more than three decades in determining joint-employer status. That changed in 2015 when the standard was expanded to include “indirect control.” The expanded definition/rule imposed major costs for potential joint employers, including vast liability risks. In the franchise industry alone, the expanded standard imposed $33.3 billion in new costs per year, lost job opportunities numbered 376,000, and there was a 93% increase in lawsuits. Industries across the U.S. economy – many vital to our supply chain – were also impacted by the broader standard. According to the American Action Forum, the standard impacted 54.6 million workers or 44% of private sector employees.

In February 2020, and following court action that denied enforcement of the 2015 standard, the NLRB restored the previous joint employer standard, “but with the greater precision, clarity, and detail that rulemaking allows,” as noted by the Board in a press release on the revised standard. Our organization agreed with that assessment and has advocated for a legislative solution to ensure predictability and certainty for America’s small business and entrepreneurial sector.

Now, the current NLRB is proposing yet another revised joint employer standard – again, an expanded standard – that, in our view, will bring costly harm to our economy and upon a vast array of businesses and local economies throughout the United States. This “ambiguous and broad” (according to the SBA’s Office of Advocacy comments) new joint employer standard embodies the worst fears of many small businesses. Without clarity, certainty and a reasonable standard, small business growth and opportunity will be restricted. And this costly and unclear standard comes during a very challenging economic period for small businesses – as inflation, a downturn in sales for many, labor shortages, supply chain issues, and a possible recession – threaten business competitiveness and survival.

The Office of Advocacy’s analysis and comments of the proposed standard, which was also informed by their engagement with small business owners and entrepreneurs across many industries, is dead-on in its assessment of the new standard’s impact. As highlighted by the Office of Advocacy:

● NLRB’s expanded joint employer definition is too broad and confusing and provides no guidance for small businesses.

● NLRB’s proposed rule conflicts with federal requirements (in federal contracting).

● NLRB’s initial regulatory flexibility analysis underestimates the compliance cost of this rule for small businesses.

Small businesses are disproportionately challenged to operate under such an unbalanced and confusing framework. Under a rule with such broad and economy-wide impact as the one NLRB proposes, small business growth and opportunity will be undermined. Opportunities for small businesses to contract with other businesses – and across industries, such as construction, staffing, hospitals and health care, retail, hospitality, restaurants…to name just a few of the many affected – will be diminished. Moreover, the franchise model is greatly threatened, which means entrepreneurs who wish to pursue this path to business ownership would be denied this wealth building opportunity. Local communities would be denied good paying jobs and tax revenue. According to the International Franchise Association, a third of entrepreneurs who own franchises say they would not be a business owner without this important model. Small businesses across critical sectors would be in jeopardy of losing independence, along with the financial investment and sweat equity they put into their businesses.

In his Economic Blueprint released in September 2022, President Biden stated that he is working to advance policies that will make the economy “more competitive, less concentrated and more resilient,” yet the proposed NLRB joint employer standard will do the exact opposite. It will lead to fewer businesses, higher business concentration, and vast uncertainty, which undermines business and economic resiliency.

According to a recent SBE Council survey of startup entrepreneurs who launched their businesses during the pandemic, respondents greatly value their independence. When asked the top reasons for starting their business: 63% wanted to be their own boss, 46% wanted more flexibility and control of their time, and 21% wanted to supplement their current income. They want the Biden Administration to focus on tax simplification and lower taxes, address high inflation, work to lower interest rates, more access to capital, fixing supply chain glitches, affordable health coverage, and less regulation. An expanded joint employer standard would make the business ecosystem more rigid, more costly, less flexible and more concentrated. That means it would disproportionately impact the startups and small businesses who drive local economies and add to the competitiveness and vibrancy of the national economy.

SBE Council believes it is vitally important that the NLRB understand the consequences of moving forward with the proposed standard. We do not believe that is the case. In fact, a case has not been made as to why an expanded joint employer standard is even necessary.

In conclusion, SBE Council urges the NLRB to withdraw the proposed standard and allow the 2020 rule to stand.

Respectfully submitted,