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Going Overboard at the Labor Board

November 24, 2014 in Economics

By Richard W. Rahn

Richard W. Rahn

Whom do you work for? Such a simple question should not require a government agency to give an answer. However, the Obama administration, in its never-ending quest for power over individuals and businesses, has decided that it — rather than you or your employer — should determine whom you work for.

On Thursday, the Senate held a hearing for President Obama’s nominee for the National Labor Relations Board, Lauren McFerran, after the administration abruptly withdrew the nomination of the tainted Sharon Block for the same post. The nomination is slated to go to the full Senate Committee on Health, Education, Labor and Pensions next week and be put to a vote by the Senate during this lame-duck session.

The reason this nomination is important is that the administration is trying to overturn decades of settled law about who is responsible for the wages, benefits and other working conditions for the employees of franchises. Millions of Americans work for companies that franchise their brand names, operating systems and expertise to hundreds of thousands of small-business people. When you go to your neighborhood McDonald’s or a Hilton hotel, chances are it is not owned and operated by the McDonald’s or Hilton corporations, but by independent entrepreneurs. More than 700,000 franchises are operating in the United States, and McDonald’s alone has more than 3,000 franchisees.

The administration is trying to overturn decades of settled law about who is responsible for the wages, benefits and other working conditions for the employees of franchises.”

Most restaurant, hotel, auto repair and other basic business chains use the franchise business model for the simple fact that it works best for customers, the company that licenses its name and operating system, the small-business person who owns and operates the stores, and the employees. Opening a small business is risky, and most fail within three years. A small-business entrepreneur can greatly reduce the risk by acquiring a licensed franchise from a major company that has the know-how, experience and brand name that most small-business people lack. Advantages to the franchisers are that they can reduce their capital outlays as they expand their businesses and have the operations run by people who know the local market, are connected to the community, and have enormous financial incentive to make the business succeed.

The National Labor Relations Board has the responsibility to be an unbiased referee in disputes between labor unions and management and to make sure that U.S. labor regulations are followed. As union membership has fallen from more than a …read more

Source: OP-EDS

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