Small Businesses Alarmed by Bombshell NLRB Decision threatening Subcontractors, Franchisees

Date: August 27, 2015

Labor Board decision essentially
redefines subcontractors as direct employees and franchise businesses as

DC (August 27, 2015)
– A decision this afternoon by the National Labor
Relations Board (NLRB) could wipe out thousands of subcontractors and franchise
businesses by treating their employees as direct employees, said the country’s
leading small business advocate today.

“If this decision stands the economic rationale
for hiring a subcontractor vanishes,” said Beth Milito, Sr. Legal Counsel for
the National Federation of Independent
Business (NFIB)
.  “It will make it
much harder for self-employed subcontractors to get jobs and of course it will
drive up operating expenses for the companies that hire them.”

Under the NLRB decision companies that hire
staffing firms to perform certain functions, like office cleaning, for example,
could be held directly responsible for the employees.  In this hypothetical case, not only would the
cleaning company be liable for alleged violations of employment law but the
firms it serves could be held liable as well. 

“If my client has all of the legal exposure of a
direct employer then he has no reason to hire my subcontracting firm,” said
Milito.  “Subcontractors will come under
pressure by their clients to change their employment policies or they’ll be cut
out of the picture altogether.”

The decision is a big threat to franchisees as

“There are tens of thousands of brand-name
businesses, like fast food restaurants, that are actually small businesses,”
said Milito.  “They are owned and
operated independently of the big corporations. 
If those corporations are suddenly responsible for the franchise
employees, they’ll be forced to exert more control over the franchisees or
eliminate the franchise model entirely and take direct control over the

According to Milito trial lawyers will be among
the biggest winners in the decision.

“Now they can sue subcontractors and the larger
firms who hire them” she said.  “They’ve
got deeper pockets to go after.” 

She said the ruling today will set off alarm bells
in the small business sector.

“Many thousands of Americans make a living as
subcontractors and this is a direct threat to them,” she said.  “They want the independence that comes with
being their own boss and they want the potential for growth.  All of that goes away if there’s no longer
any regulatory or financial advantages in hiring subcontractors.”

Jack Mozloom, 202-406-4450 or 609-462-5610


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