Oct 09, 2015 - 10:00am

Small Business Under Siege: Congress Rips Overtime and Joint Employer Rules


Executive Director, Communications & Strategy

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The Department of Labor and the National Labor Relations Board have been making life plenty difficult for small business owners lately. It’s only appropriate, then, that both agencies took plenty of heat for it this week in Congress.  

In separate hearings this week, the Senate Health, Employment, Labor and Pensions Committee and the House Small Business Committee ripped the NLRB’s new joint employer rule and DOL’s recently proposed overtime rules, respectively. In particular, lawmakers took issue with the detrimental impact both rules are expected to have on small businesses.

During the hearing in the Senate, one exchange aptly conveyed the confusion and problems cause by the NLRB’s recent joint employer ruling, in which the agency determined that indirect control or even potential control over employment terms could be enough for a company to be considered a “joint employer” for certain purposes. It’s clear that the key word is “could.”

In the exchange, Ciara Stockeland, who owns a North Dakota-based franchise of outlet stores, expressed concerns that the NLRB’s new ruling could subject her company to liability for actions taken or decisions made by her franchisees or contractors. An attorney at the hearing tried to reassure Stockeland that her company wouldn’t be affected by suggesting that NLRB plans to apply the rule on “a case-by-case basis.”

“That’s just the point — there’s no definition here,” Stockeland said Tuesday, according to a report from American City Business Journals. “What the NLRB has done is establish a nebulous joint employer doctrine that allows it to target any business relationship it wants.”

Speaking on behalf of the Coalition to Save Local Businesses, Stockeland urged lawmakers to pass legislation overturning the NLRB’s ruling. If the ruling stands, the resulting uncertainty, she said, would “jeopardize the expansion of my business.”

Stockeland is one of many small companies that would be hobbled by the new joint employer rule – which garnered sharp criticism from top lawmakers on the panel.

Committee Chairman Lamar Alexander (R-Tenn.) said the NLRB’s decision threatens to “steal the American dream from owners of 780,000 franchise businesses and millions of contractors. More broadly, it “threatens to destroy our free enterprise, entrepreneurial spirit,” he said.

“I believe it’s time for Congress to act as soon as possible to stop this destructive policy that damages the middle class growth that has made our country what it is today,” Alexander added.

Over in the House, lawmakers two days later blasted the Department of Labor for its onerous new “one-size-fits-all” overtime exemption rule. In an instance in which President Obama asked the agency to streamline and simplify the regulations that determine which workers are exempt from overtime rules, the agency responded by doing precisely the opposite.

“Judging by the reaction from small business owners across the country, this proposed regulation doesn’t streamline or simplify,” said Rep. Crescent Hardy (R-), chairman of the House Small Business Committee’s subpanel on oversight, investigations and regulations. “Instead, it increases costs for small businesses and reduces flexibility for American workers.”

Specifically, the rule will raise costs for employers by more than doubling the salary limit under which employees qualify for overtime pay, thus decreasing the number of employees who are exempt from overtime pay rules. It’s a cost increase that Hardy - citing reports published by the chief counsel of advocacy at the Small Business Administration - pointed out on Thursday “will have a heck of an impact on a small business owner’s bottom line.”

One of those small businesses is Bardenay Restaurants & Distilleries of Idaho, the nation’s first ever restaurant with an on-site liquor distillery. With three locations in Idaho and approximately 200 employees, Bardenay owner Kevin Settles says the department’s new overtime rule would force him to reclassify many of his workers, and for some of them, it may mean pay cuts.

In addition, Settles said that “these newly overtime-protected employees could lose flexibility as well as benefits, including substantive bonuses, paid vacation, flex time, paid holidays, and health insurance” - not something his employees or the economy need right now.

Unfortunately, onerous new regulations have become a common theme recently for Bardenay and countless other small businesses around the country.

“I must point out that the these overtime regulatory proposals add to the tremendous amount of uncertainty created by new and expanding federal regulations over the last five years,” said Settles. “This uncertainty has been a key factor in extending the longest time period without expansion in my years as an independent businessman.”

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About the Author

About the Author

J.D. Harrison
Executive Director, Communications & Strategy

J.D. Harrison is the Executive Director for Strategic Communications at the U.S. Chamber of Commerce.