Source: United States Senator for Oklahoma James Inhofe
U.S. Sen. Jim Inhofe (R-Okla.) sent a letter today urging the National Labor Relations Board to abandon efforts to implement a rule that, if finalized, could deeply harm thousands of Oklahoma small businesses. Under the Obama Administration, a similar rule cost the franchise sector $33.3 billion per year, resulting in more than 375,000 lost job opportunities, and almost doubled the amount of costly and time-consuming litigation against franchise businesses, which thwarted economic growth.
Inhofe writes: “On September 6, 2022, the National Labor Relations Board announced a Notice of Proposed Rulemaking (NPRM) to revisit the current regulation setting forth standards for joint employer status under the National Labor Relations Act (“NLRA” or “the Act”). I write to urge the Board to abandon this effort in order to prevent the deep harm that it would cause to our nation’s economy, particularly for small business owners.”
Inhofe continues: “…In contrast to the current rule, a more expansive joint-employer standard in place prior to the current rule was inefficient, exceedingly expensive, and resulted in the creation of fewer jobs. In fact, an economic analysis by the International Franchise Association in 2019 concluded that, in the franchise sector alone, this standard cost businesses $33.3 billion per year, resulted in more than 375,000 lost job opportunities, and almost doubled the amount of costly and time consuming litigation. At a time when we are facing the highest inflation rates in four decades and arguably are already experiencing an economic recession, a reversion to such ill-advised policies would only make these problems worse.”
Full text of the letter is available here and below.
Dear Chair McFerran:
On September 6, 2022, the National Labor Relations Board announced a Notice of Proposed Rulemaking (NPRM) to revisit the current regulation setting forth standards for joint employer status under the National Labor Relations Act (“NLRA” or “the Act”). I write to urge the Board to abandon this effort in order to prevent the deep harm that it would cause to our nation’s economy, particularly for small business owners.
According to the U.S. Small Business Administration, there are over 360,000 small businesses in Oklahoma, and nearly all are subject to the NLRA. In 2020, the Board, via notice and comment rulemaking, published a final rule adopting a standard for joint-employer status under the Act. That rule, which continues to be in effect today, provides that an employer will be considered a joint employer under the NLRA only where it exercises “substantial direct and immediate control” over the essential terms and conditions of another company’s employee. The rule rejected prior standards adopted by the Board, which held that indirect control or the mere reserved right of control – even if never exercised – could be sufficient to find one company liable as the joint employer of another company’s employees.
The 2020 rule protects employees whose employment terms are truly controlled by more than one company, while allowing employers clarity and certainty as to their obligations under the law. I urge the Board to maintain this standard.
In contrast to the current rule, a more expansive joint-employer standard in place prior to the current rule was inefficient, exceedingly expensive, and resulted in the creation of fewer jobs. In fact, an economic analysis by the International Franchise Association in 2019 concluded that, in the franchise sector alone, this standard cost businesses $33.3 billion per year, resulted in more than 375,000 lost job opportunities, and almost doubled the amount of costly and time consuming litigation. At a time when we are facing the highest inflation rates in four decades and arguably are already experiencing an economic recession, a reversion to such ill-advised policies would only make these problems worse.
Further, revising the Board’s existing rule is premature and cannot be sufficiently justified under the Administrative Procedure Act (APA). It is well-settled that under the APA, an agency may change existing policy but must “provide a reasoned explanation for the change,” Encino Motorcars, LLC v. Navarro, 57 U.S. 211,221 (2016); and “show that there are good reasons for the new policy.” Id at 221. The Board adopted the existing rule in 2020, but since that time the Board has not issued any decision actually applying the current regulatory framework. In the absence of any experience with the new rule, or evidence to show how or why it purportedly fails to effectuate the purposes of the Act, it is difficult to understand how the Board could justify any significant update to a rule that is two years old.
For these reasons, I urge that the Board reconsider its NPRM for joint-employer status under the National Labor Relations Act that could deeply harm small businesses in Oklahoma and throughout our country.
Sincerely,