October 5, 2022

Unitranche

Supportive Business Potential

Sinema has a golden opportunity to stand with small businesses

Two items on big labor’s wishlist have languished for months on end despite having Democratic control of Congress and President Joe BidenJoe BidenUS could spend M monthly on testing unvaccinated federal workers: official GOP senator opposes Biden court pick, likely blocking nominee Overnight Energy & Environment — Biden says Russia attack could spike oil prices MORE in the Oval Office.  

The first item on the list, the Protecting the Right to Organize (PRO) Act, would upend American labor law to boost cratering union membership. The bill does this by nullifying right-to-work laws nationwide, which prohibit employers from forcing their employees to join a union as a condition of employment. The PRO Act also makes it nearly impossible to work as an independent contractor by codifying California’s ABC test, threatening the 59 million Americans that engage in freelance work.  

The PRO Act is live ammunition. The bill passed the House of Representatives last year and has 47 cosponsors in the Senate, all of whom are Democrats. Notably, two Democrats have stayed off the PRO Act so far — Arizona Sens. Mark KellyMark KellyOvernight Energy & Environment — Biden says Russia attack could spike oil prices Dem plan to suspend the gas tax faces bipartisan pushback Sinema has a golden opportunity to stand with small businesses MORE and Kyrsten SinemaKyrsten SinemaSinema has a golden opportunity to stand with small businesses 1 in 4 Democrats say party did not take full advantage of control of power in 2021: poll Black voters are fleeing Biden in droves. Here’s why MORE.  

Sinema in particular has attracted national attention for bucking her party when the interests of her constituents differ from the Democratic legislative agenda. Despite pressure from left-wingers that follow her into bathroom stalls, Sinema has a maverick streak that allows her to oppose bad ideas if they are bad for her state. 

With the PRO Act on ice for now, Biden has renominated radical academic, David Weil, for wage and hour administrator, the second item on big labor’s wishlist. If confirmed, Weil could implement pieces of the PRO Act by fiat even if the bill never becomes law, a clear threat to workers in the Grand Canyon state.  

The Department of Labor’s Wage & Hour Division is often overlooked, but the $330 million agency is responsible for enforcing all major labor laws in the United States. The wage and hour administrator has an enormous opportunity to shape the direction and enforcement of American labor law.  

Weil is openly hostile to business models that Arizonans rely on to put food on the table. Weil has inveighed against franchising as a “form of outsourcing” and baselessly asserted that “franchises may be more willing to violate consumer, workplace, or environmental regulations.”  

During Weil’s previous stint as wage and hour administrator under the Obama administration, he issued guidance that asserted a joint employer relationship existed when the franchisor exercised “indirect control” over the franchisee’s employees. The Trump Department of Labor rescinded the guidance, but if Weil gets another chance at wage and hour, franchises will again be under siege. 

Under current law, a franchisor licenses the use of its brand, business model and products to a franchisee. In return, the franchisee pays the franchisor royalties or fees laid out in a franchise agreement. In practical terms, if you slip on a wet floor in McDonald’s, you can sue the individual franchisee but not the McDonald’s corporation. If Weil succeeds in expanding the definition of a joint employer, you would be able to sue both. This would increase corporate control over locally-owned franchise businesses, which currently enjoy relative independence because franchisors have limited liability over their day-to-day operations.  

Upending the franchise model would be a devastating blow to the Arizona economy. There are approximately 14,500 franchise locations supporting over 153,000 jobs. Franchises are responsible for $5.5 billion in payroll, $13.6 billion and economic output, and $8.2 billion in state GDP. Seventy-five percent of Arizona voters say that franchises help their local economy, and 80 percent of voters have a favorable view of a franchise in their neighborhood.  

Weil also issued guidance in 2015 designed to strip American workers of their independent contractor status, alleging that most independent contractors are “intentionally misclassified as a way to cut costs and avoid compliance with labor laws” and baselessly asserting that “most workers are employees.”  

Arizona’s independent contractors are free to set their own hours, determine their workload, and do not have to report to a boss. Independent contractors overwhelmingly prefer the flexibility of freelancing to the rigidity of a traditional employment relationship, and fewer than 1 out of 10 would prefer to reclassify as a W-2 employee. Independent contractors come in all shapes and sizes, including court stenographers, florists, electricians, rideshare drivers, plumbers and wedding planners. Weil’s narrow, academic view of independent contracting will threaten thousands of real Arizona jobs.  

If confirmed, Weil will have a second chance at testing out his ivory tower theories on American workers. Even if the PRO Act fails to become law, Weil can still implement the bill’s worst ideas. This would cause enormous damage to Arizona’s workers and economy.  

Despite tremendous pressure from her party and the left-wing, Sinema has held strong and stayed off the PRO Act. Arizona workers, voters and small businesses would appreciate that same commitment and independence in opposing David Weil for wage and hour administrator.

Tom Hebert is federal affairs manager at Americans for Tax Reform and executive director of the Open Competition Center.