Economy, Regs, & Taxes

The New U.S. Business Model: ObamaCorps

The NLRB's decision could remake a vast swath of the economy.

Robin Smith · Aug. 31, 2015

The National Labor Relations Board (NLRB) handed down a decision last week that could remake a vast swath of the economy. Where have we heard that before with this administration? The rule essentially took nine million American workers employed by just under 800,000 franchise businesses and moved their employment from the direct supervision of the franchisee to the big-brand parent company. To paraphrase Joe Biden’s comments when ObamaCare was signed, this is a big freaking deal.

The Democrat-controlled NRLB, Barack Obama’s instrument for decisions and rulings benefiting labor unions — involving issues such as collective bargaining and the minimum wage, just to name two — could potentially destroy the franchise business model. How? The NLRB blurred the lines of “direct and immediate” control over employees of franchises, meaning the corporation now has more control than the franchise.

The partisan vote, supported only by Democrats in the majority on the NRLB, undermines the current responsibility of the franchise owner as the business owner and employer that hires, fires, pays employees, determines promotions, raises and benefits offered. As always, the Obama administration aims to make everything part of a centrally controlled process dominated by the government.

In effect, the NLRB’s ruling has turned business entrepreneurs who have risked capital, hired staff and sacrificed for earnings as franchise owners into middle managers to oversee employees on the payroll of the big corporation.

In the era of economic failure caused by the too-big-to-fails, Obama’s union thugs, who are federally tasked with representing worker rights as an agency, have only turned the large corporate entities into larger corporate entities.

Franchises are contracts to what are functionally small business owners, through which corporations can leverage the scale of purchasing, advertising and brand development to local businesses that agree to maintain product and service standards regarding quality and pricing. Otherwise, the franchise owner controls the business. A prime example: 90% of McDonald’s restaurants are franchises, and those franchises employ 1.5 million of McDonald’s 1.9 million employees. Other large brands using the franchise model include food-industry giants such as Taco Bell, Chick-fil-A and Wendy’s, and service industry corporations like Hampton Inns, Hilton Hotel brands, Great Clips hair salons, Liberty Tax Service and Save-A-Lot Foods.

But as Beth Milito, senior legal counsel for the National Federation of Independent Business, explains, “If … corporations are suddenly responsible for the franchise employees, they’ll be forced to exert more control over the franchisees.” In fact, she adds, they might even “eliminate the franchise model entirely and take direct control over the locations.”

Ironically, the first black president has made it tougher for minorities, who, according to The Heritage Foundation’s James Sherk, are “almost 50% more likely” to own franchised businesses versus non-franchised businesses. So much for empowering minority-owned businesses in the Obama economy.

So why is the NRLB forcing employers to abdicate their business processes to the Giant Corporation model?

You already know. Large employers make easier targets for labor unions to win unionization. Soon, there could be the Ronald McDonald Teamsters, the Great Clips Scissorworkers, and the United Brotherhood of Hilton Garden Inn Employees. The “protections” offered by labor unions are documented and proven: The mediocre and worst employees are protected and any who work hard carry the load of the former. Many union members are good workers, but there are some very rotten apples in the bunch, too (like this New Jersey teacher who gets to keep his $90,000 job despite being tardy more than a hundred times). And above all, Big Labor is a critical Democrat constituency.

Union membership is at historical lows, especially outside the confines of government, with only 7.4 million workers in private-sector unions in 2014 according to the U.S. Bureau of Labor Statistics. But those who fear competition and personal accountability in the workplace are using their favorite vehicle — tyrannical government — to create a situation inviting thuggery organized labor.

Obama has successfully socialized America’s health care — ObamaCare; provided cell phones as part of welfare — ObamaPhones; created new controls for the Internet — ObamaNet; is working to force neighborhoods to build low-income housing run by the U.S. Department of Housing and Urban Development — ObamaHoods. Why would this tyrant not move to destroy the free market system and effective business models through organized labor’s oppression and government-controlled prices and wages with ObamaCorps? He’s got a country to fundamentally transform, after all.

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