Even when she was still young, Ciara Stockeland knew she wanted to open her own business.
The granddaughter and daughter of entrepreneurs, Stockeland became a third-generation small business owner when she founded and successfully franchised Mode, a female fashion boutique.
Now Stockeland’s afraid she could lose it all.
On Tuesday, testifying before the Senate Committee on Health, Education, Labor and Pensions, she told lawmakers that her business “is facing serious uncertainty” and has been “jeopardized” by the National Labor Relations Board’s August ruling in the Browning-Ferris case.
In that decision, the NLRB broadened the definition of a “joint employer,” requiring businesses to assume new responsibility for the labor actions of their subcontractors. Under this new standard, franchise owners like Stockeland expect to incur additional liability and management cost.
With over 780,000 franchises generating nearly 3 percent of national GDP according to the National Franchise Association, the NLRB’s new definition could have significant consequences.
Opponents fear that the increased regulatory burden will crowd out opportunity for small business across the country.
At Tuesday’s hearing, Chairman Lamar Alexander, R-Tenn., warned that the NLRB’s “new joint standard will make big business bigger and the middle class smaller by discouraging larger companies from franchising and contracting work to small business.”
The Tennessee senator said the decision “threatens to steal the American dream … and destroys the free enterprise, entrepreneurial spirit,” of the nation.
To undo that danger, Alexander urged support for his “Protecting Local Business Opportunity Act.” The legislation would amend the National Labor Relations Act to define a joint employer only if a company exercised “actual, direct, and immediate” control over a contracted or franchised worker. That bill, S. 2015, already has 46 cosponsors and corresponding legislation in the House.
Some Democrats argue that Republican reaction to the decision has been overblown. They maintain that large corporations have used franchises and contractors as avenues to export accountability.
“Some big businesses have figured out how to dodge responsibility,” said Sen. Elizabeth Warren, D-Mass. “A parent company enjoys the right to make managing decisions but without the obligation to respect collective bargaining rights.”
Michael Ruben, a San Francisco lawyer who also testified, remained adamant that these rules wouldn’t have an impact on small businesses. Asked if a franchisor would be liable when simply offering training and branding, Ruben advised that the NLRB would evaluate “on a case-by-case basis.”
Turing to Stockeland, Ruben said, “I can say with confidence that this would not be a problem for you and your franchise.”
She wasn’t convinced.
“There’s no definition for who decides if a franchisor is big or small,” she responded. “I don’t want the liability of having to run and operate employees and obey labor standards across multiple stores.”
After the hearing, Stockeland told The Daily Signal that “there’s still no clarity,” and “it’s a very broad definition.”
Although the franchisor of a dozen different boutiques across the Midwest, she employs only ten employees directly in Fargo, N.D. The individual franchises make their own hiring and firing decisions.
Stockeland chose the franchise model because she didn’t feel that managing remotely would be fair or efficient. “I really decided to franchise because I couldn’t manage employees from a distance. If I would’ve grown, I would have had to manage employees from hours away.”
And from the beginning, she wanted to start a business, not “just a single store as a hobby.” But looking back, she says, “I absolutely would not have been as eager” to begin a business under the new NLRB standard.
“The uncertainty of not knowing what this liability could mean for me and my family would stunt my growth,” she predicts.
She says she’s already felt the impact of the NLRB decision and hears “chatter of not knowing what’s going to happen.”
When starting up, Stockeland remembers waking up in the middle of the night to double-check her bank account, worrying that she might not make rent that month. Though successful now, Sotckeland didn’t turn a profit for the first eight years.
“You have enough to worry about as a small business owner,” she explained. “Let’s not add to that environment, where you constantly have to worry more because there might be a lawsuit.”
