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Montana business leaders express concerns over proposed federal rule

Franchise Businesses
Posted at 6:44 PM, Jan 08, 2024

HELENA — A federal agency has proposed a new rule that would expand which businesses have to be involved with certain labor negotiations. Supporters say it will fix a loophole and protect workers’ rights, but some business leaders in Montana are raising concerns about the impact it could have.

The National Labor Relations Board is preparing to implement a new “joint employer rule.” It says companies that can exert control over the terms and conditions of someone’s employment – like wages, schedule, hiring and working conditions – has to be involved in collective bargaining for that employee, even if the control is indirect and even if it isn’t actually exerted.

Lauren McFerran, the NLRB’s chair, said in a statement included in their press release announcing the rule that it would be a “practical approach to ensuring that the entities effectively exercising control over workers’ critical terms of employment respect their bargaining obligations under the NLRA.”

The new rule is set to take effect Feb. 26.

Under the current rule, established during the Trump administration, a business is only a joint employer if they have “substantial direct and immediate control” over terms and conditions of employment.

Jason Small, executive secretary of the Montana AFL-CIO, said one particular reason for the change is to ensure companies that have contracts with their workers can’t skirt around them by treating workers differently if they’re employed by a subcontractor.

“Basically all this rule is saying is if a company has the power to implement changes in the workplace, they have to be at the bargaining table,” he said.

Small said, in the end, he doubted the rule change would have a very large impact within Montana.

But on Friday, some business representatives held a press call, where they said the new rule could have unintended consequence that would put a “chilling effect” on them. They asked Montana’s congressional delegation to push back against the rule.

“The impact to the business community is very deep, and it's very wide and it is statewide,” said Todd O’Hair, president and CEO of the Montana Chamber of Commerce.

They said their biggest concerns were for franchises – businesses, like chain restaurants, that are part of a larger brand but have independent local owners for each location.

“A lot of the franchises that we think about as big business aren't big business, they just bought the business model,” said Brad Griffin, president of the Montana Retail Association and Montana Restaurant Association. “They're small business owners here in Montana who employ hundreds and thousands of employees and generate a huge economic footprint.”

Mike Layman, senior vice president of government relations and public affairs for the International Franchise Association, said Montana has more than 3,000 franchise businesses, which employ more than 32,000 people. He said they were worried that those businesses could be pulled into labor actions because of things they had nothing to do with, and that they might face higher operations and legal costs.

Mike Ferretti is chairman and CEO of Great Harvest, which has almost independently owned bakeries and cafes across the country but is headquartered in Dillon, Montana. He says, when a similar joint employer standard was in effect during the Obama administration, his company spent heavily to make sure they remained in compliance. He expects they’d have to do so again if the rule returns.

“We were going through this with our franchise attorney on a monthly basis, making sure that we didn't do anything that would trigger an obvious impact to us,” he said.

Ferretti said Great Harvest doesn’t have pure “command and control” over its franchises, and that he explicitly avoids advising franchisees on things like setting prices to make sure they don’t trigger the joint employer rule.

Those on the call Friday want Montana’s members of Congress to back resolutions that would officially disapprove the new joint employer rule. If both the House and Senate supported the resolutions, they could stop the rule from going into effect – though President Joe Biden could veto the resolutions and allow the rule to continue unless at least two-thirds of both chambers agree.

Republican Sen. Steve Daines is a cosponsor of the Senate resolution to disapprove the rule.

“The Biden administration’s new rule threatens to undermine the franchise model that helps Montanans of all backgrounds start businesses, create jobs and live the American dream,” he said in a statement to MTN. “This heavy-handed regulation is just one on Biden’s list of anti-small business rules that kill jobs and make it harder for employers to keep their doors open, and I’ll be fighting against it every step of the way.”

A spokesperson for Democratic Sen. Jon Tester told MTN he’s “continuing to have conversations with Montanans on how the Joint-Employer rule may impact small businesses and labor practices.”

An article from Bloomberg Law says the House is likely to vote on its resolution on the joint employer rule this week. There’s no word yet on when the Senate will vote on its resolution.

A fact sheet from the NLRB on the proposed rule says not all franchisors and franchisees will be considered joint employers, and that they will examine each case individually based on their authority over terms and conditions of employment.

“The bottom line is that, while the final rule establishes a uniform joint-employer standard, the Board will still have to conduct a fact-specific analysis on a case-by-case basis to determine whether two or more employers meet the standard,” the fact sheet said.