[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
REDEFINING EMPLOYER AND THE
IMPACT ON ALABAMA'S WORKERS
AND SMALL BUSINESS OWNERS
=======================================================================
FIELD HEARING
BEFORE THE
SUBCOMMITTEE ON HEALTH,
EMPLOYMENT, LABOR, AND PENSIONS
COMMITTEE ON EDUCATION
AND THE WORKFORCE
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD IN MOBILE, ALABAMA, AUGUST 25, 2015
__________
Serial No. 114-25
__________
Printed for the use of the Committee on Education and the Workforce
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: www.gpo.gov/fdsys/browse/
committee.action?chamber=house&committee=education
or
Committee address: http://edworkforce.house.gov
___________
U.S. GOVERNMENT PUBLISHING OFFICE
95-829 PDF WASHINGTON : 2016
________________________________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government Publishing Office,
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center,
U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).
E-mail, [email protected].
COMMITTEE ON EDUCATION AND THE WORKFORCE
JOHN KLINE, Minnesota, Chairman
Joe Wilson, South Carolina Robert C. ``Bobby'' Scott,
Virginia Foxx, North Carolina Virginia
Duncan Hunter, California Ranking Member
David P. Roe, Tennessee Ruben Hinojosa, Texas
Glenn Thompson, Pennsylvania Susan A. Davis, California
Tim Walberg, Michigan Raul M. Grijalva, Arizona
Matt Salmon, Arizona Joe Courtney, Connecticut
Brett Guthrie, Kentucky Marcia L. Fudge, Ohio
Todd Rokita, Indiana Jared Polis, Colorado
Lou Barletta, Pennsylvania Gregorio Kilili Camacho Sablan,
Joseph J. Heck, Nevada Northern Mariana Islands
Luke Messer, Indiana Frederica S. Wilson, Florida
Bradley Byrne, Alabama Suzanne Bonamici, Oregon
David Brat, Virginia Mark Pocan, Wisconsin
Buddy Carter, Georgia Mark Takano, California
Michael D. Bishop, Michigan Hakeem S. Jeffries, New York
Glenn Grothman, Wisconsin Katherine M. Clark, Massachusetts
Steve Russell, Oklahoma Alma S. Adams, North Carolina
Carlos Curbelo, Florida Mark DeSaulnier, California
Elise Stefanik, New York
Rick Allen, Georgia
Juliane Sullivan, Staff Director
Denise Forte, Minority Staff Director
------
SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR, AND PENSIONS
DAVID P. ROE, Tennessee, Chairman
Joe Wilson, South Carolina Jared Polis, Colorado,
Virginia Foxx, North Carolina Ranking Member
Tim Walberg, Michigan Joe Courtney, Connecticut
Matt Salmon, Arizona Mark Pocan, Wisconsin
Brett Guthrie, Kentucky Ruben Hinojosa, Texas
Lou Barletta, Pennsylvania Gregorio Kilili Camacho Sablan,
Joseph J. Heck, Nevada Northern Mariana Islands
Luke Messer, Indiana Frederica S. Wilson, Florida
Bradley Byrne, Alabama Suzanne Bonamici, Oregon
Buddy Carter, Georgia Mark Takano, California
Glenn Grothman, Wisconsin Hakeem S. Jeffries, New York
Rick Allen, Georgia
C O N T E N T S
----------
Page
Hearing held on August 25, 2015.................................. 1
Statement of Members:
Bradley, Hon. Bradley, a Representative in Congress from the
state of Alabama........................................... 3
Prepared statement of.................................... 5
Roe, Hon. David P., Chairman, Subcommittee on Health,
Employment, Labor, and Pensions............................ 1
Prepared statement of.................................... 2
Statement of Witnesses:
Carey, Colonel Steve, (USAF, RET.), Owner/Operator, CertaPro
Painters of Mobile and Baldwin Counties, Daphne, AL........ 15
Prepared statement of.................................... 18
Debruge, Mr. Marcel L., Labor Attorney, Burr & Forman LLP,
Birmingham, AL............................................. 6
Prepared statement of.................................... 9
Holmes, Mr. Chris, Area Representative, Firehouse Subs, and
CEO, CLH Development Holdings, Inc., Tallahassee, FL....... 23
Prepared statement of.................................... 25
REDEFINING `EMPLOYER' AND THE IMPACT
ON ALABAMA'S WORKERS AND
SMALL BUSINESS OWNERS
----------
Tuesday, August 25, 2015
House of Representatives
Subcommittee on
Health, Employment, Labor, and Pensions
Committee on Education and the Workforce
Washington, D.C.
----------
The Subcommittee met, pursuant to call, at 10:02 a.m., at
the University of South Alabama, Alabama Student Center
Ballroom, 350 Campus Drive, Mobile, Alabama, David P. Roe
[chairman of the subcommittee] presiding.
Present: Representatives Roe and Byrne.
Staff present: Janelle Belland, Coalitions and Members
Services Coordinator; Christie Herman, Professional Staff
Member; Tyler Hernandez, Press Secretary; John Martin,
Professional Staff Member; and Eunice Ikene, Minority Labor
Policy Associate.
Chairman Roe. A quorum being present, the Subcommittee on
Health, Employment, Labor, and Pensions will come to order. I
first would like to recognize myself for opening remarks, this
morning.
Good morning, everyone. We welcome today's hearing. I first
would like to take a moment to thank our witnesses for joining
us. I would also like to thank the staff here at the University
of South Alabama for their hospitality, and also to our
security that is here today. Thank you for being here.
I am happy to be here, and I am thankful for the
opportunity to get out of Washington and to hear directly from
you about an issue that could have significant consequences for
a lot of people in Alabama and across this country. That issue
is an effort by a handful of unelected bureaucrats in
Washington who are trying to fundamentally change the way
franchise businesses operate.
This is a complicated issue, and before I get into what the
Board is trying to do, I want to say a little bit about what is
at stake. More than 780,000 franchise businesses currently
operate in the United States, employing nearly 9 million
workers. These small businesses, which are independently owned
and operated, have helped create jobs and allowed countless
individuals to realize the dream of owning their own business.
Franchise businesses are vital to countless communities and
working families.
A federal agency known as the National Labor Relations
Board is trying to upend the franchise model by changing what
it means to be an employer. The NLRB's general counsel is
pushing the Agency to blur the lines of responsibility between
a franchisee--that is the person who owns and operates the
business locally--and the franchisor--the entity that enables a
small business owner to use an established brand to sell
certain goods or services in a particular area.
This effort would make both ``joint employers'' and give
them equal responsibility for decisions affecting the day-to-
day operations of the business: decisions like hiring,
training, wages, and work schedules. What will this look like
in the real world?
For starters, these small business owners, these
franchisees, will have less freedom to operate their own
businesses. If a franchisor is suddenly responsible for
decisions affecting employees at each individual franchise,
they will naturally assert more control over those decisions.
That just makes common sense. More control for the franchisor,
of course, means less control for the franchisee--the local
business owner. And suddenly that small business owner is no
longer making decisions about the way his or her business is
run. Individuals like Mr. Holmes and Colonel Carey, who have
worked hard to start their own businesses, may no longer decide
who their employees are, when they work, how they are trained,
hours they work.
But the consequences of expanding the joint employer
standard are not just operational. Such a move will also lead
to higher consumer costs, fewer small businesses, lost jobs,
more litigation, fewer opportunities for individuals to pursue
the American Dream, just the opposite of what we need to be
doing in this country right now.
To make matters worse, the NLRB might extend this flawed
approach to businesses outside the franchise industry, like
contractors and subcontractors. A change like that would
disrupt countless businesses here in Mobile and all along the
Gulf Coast and across this country. It is not easy starting a
small business, let alone keeping a small business afloat in
this economy.
The last thing we need is an unelected and unaccountable
board of bureaucrats to make it more difficult to pursue the
American Dream. By sharing your stories and concerns today, you
are helping us to fight back against this misguided scheme and
ensure policies are in place that promote, instead of
discourage, economic growth and development.
I want to thank our witnesses again for being here today
and sharing their personal experiences with the Committee. I
look forward to hearing from each of you.
Prepared Statement of Hon. David P. Roe, Chairman, Subcommittee on
Health, Employment, Labor, and Pensions
Good morning, everyone, and welcome to today's hearing. I'd first
like to take a moment to thank our witnesses for joining us. I would
also like to thank the staff here at the University of South Alabama
for their hospitality.
I'm happy to be here and thankful for the opportunity to get out of
Washington and hear directly from all of you about an issue that could
have significant consequences for a lot of people in Alabama and across
the country. That issue is an effort by a handful of unelected
bureaucrats in Washington that are trying to fundamentally change the
way franchise businesses operate.
This is a complicated issue, but before I get into what the board
is trying to do, I want to say a little bit about what's at stake. More
than 780,000 franchise businesses currently operate in the United
States, employing nearly nine million workers. These small businesses,
which are independently owned and managed, have helped create jobs and
have allowed countless individuals to realize the dream of owning a
business. Franchise businesses are vital to countless communities and
working families.
A federal agency, known as the National Labor Relations Board, is
trying to upend the franchise model by changing what it means to be an
employer. The NLRB's general counsel is pushing the agency to blur the
lines of responsibility between a franchisee - the person who owns and
operates the business locally - and a franchisor - the entity that
enables the small business owner to use an established brand to sell
certain goods or services in a particular area. This effort would make
both ``joint employers'' and give them equal responsibility for
decisions affecting the day-to-day operations of the business -
decisions like hiring, training, wages, and work schedules. What would
this look like in the real world?
For starters, these small business owners, these franchisees, will
have less freedom to operate their own businesses. If a franchisor is
suddenly responsible for decisions affecting employees at each
individual franchise, they will naturally assert more control over
those decisions. More control for the franchisor, of course, means less
control for the franchisee, and suddenly, that small business owner is
no longer making decisions about the way his or her business is run.
Individuals like Colonel Carey and Mr. Holmes who have worked hard to
start their own businesses may no longer decide who their employees
are, when they work, and how they are trained.
But the consequences of expanding the joint employer standard
aren't just operational. Such a move will also lead to higher consumer
costs, fewer small businesses, lost jobs, more litigation, and fewer
opportunities for individuals to pursue the American Dream. To make
matters worse, the NLRB might extend this flawed approach to businesses
outside the franchise industry, like contractors and subcontractors. A
change like that would disrupt countless businesses here in Mobile, all
along the Gulf Coast, and across the country.
It's not easy starting a small business, let alone keeping a small
business afloat in this economy. The last thing we need is for an
unelected and unaccountable board of bureaucrats to make it more
difficult to pursue the American Dream. By sharing your stories and
concerns today, you are helping us to fight back against this misguided
scheme and ensure policies are in place that promote - instead of
discourage - economic growth and job creation.
I want to thank our witnesses again for being with us today and
sharing their personal experiences with the committee. I look forward
to hearing from each of you, so I'm going to yield to my distinguished
colleague and our host today, Congressman Bradley Byrne, for his
opening remarks.
______
I will now take this opportunity to recognize our host
today, Congressman Byrne, for his opening remarks.
Mr. Byrne. Thank you, Mr. Chairman. I am pleased to welcome
you and our witnesses to Alabama's 1st Congressional District
to speak about the importance of the NLRB's interpretation of
``joint employer,'' which will impact, as you said, thousands
of business owners and their employees in my district and
throughout the country.
I will say, Mr. Chairman, I know that you are a physician
by training and background, but as a former labor and
employment attorney after watching you the last year and a half
on this subcommittee, I think you missed your calling. You
could be a labor and employment attorney. You have mastered
these issues wonderfully. And I really appreciate the extent to
which you have poured yourself into understanding not just the
technical application, but the real world experience that we
have here.
I also want to welcome and thank the committee staff. I
know you all have worked very hard to make this work. You are
outside of Washington, so thank you for doing that. And, of
course, the University of South Alabama, I could not be prouder
of this university. This is my university. It is in my
district, and you all have done a great job today.
I want to thank our witnesses, two of whom I know very
well. I appreciate you being here. We have a gentleman who has
driven a long way from Tallahassee to be here. I know how long
that road is on I-10. Thank you for coming.
Mr. Holmes. My pleasure.
Mr. Byrne. And we want to thank all the members of the
public for being here.
Committee hearings have always provided transparency and a
way for the public to hear their representatives debate
important issues. Field hearings, however, provide a much more
tangible way for our constituents, like the people of South
Alabama, to be directly involved in the process. Issues like
the NLRB's definition of a ``joint employer'' under national
labor law affects Main Street businesses in a real way, and it
is imperative for Congress to come directly to the people to
discuss the impact these decisions will have on their everyday
lives.
As Chairman Roe explained, the NLRB is tasked with
determining whether two businesses may be considered joint
employers under the National Labor Relations Act. This
definition is then used by the NLRB to mediate labor disputes
and to determine the rights and protections afforded to
employees under national labor laws.
We, as a committee, have discussed joint employer status
before in the Browning-Ferris v. NLRB case. It was during that
discussion that the franchise-joint employer relationship was
brought up. Now, as a former management attorney who has worked
in this field for over 30 years, it truly boggles my mind that
we are even talking about redefining the joint employer
relationship in the franchise industry.
The franchise model's way of doing business has been around
for decades, and it represents a win-win for franchisors,
franchisees, and, most importantly, franchisee employees.
Franchisees get the gratification of charting their own course,
owning their own business, while franchisors benefit from the
licensing of their product. As a franchise expands, more
opportunities are created for both the employees of the
franchise and for the franchisee.
During our last hearing, my colleagues on the other side of
the aisle could not understand why the franchise industry was
worried about their status as independent business owners and
why franchisors were worried about what this would do to their
business model. The answer is simple: expanding the definition
of ``joint employer'' increases the liability of doing
business. It changes the franchisor/franchisee relationship. It
disrupts the flow of commerce and puts long-term job growth in
jeopardy. These proposed changes will directly impact products
and services that people have come to depend on across the
United States.
I look forward to hearing from our witnesses about the
impacts this change will have for business owners and their
employees. Thank you, Mr. Chairman, and once again we welcome
everybody to the 1st District of Alabama.
Prepared Statement of Hon. Bradley Byrne, a Representative in Congress
from the state of Alabama
I am pleased to welcome Chairman Roe and our witnesses to Alabama's
First Congressional District to speak about the importance of the
National Labor Relations Board's interpretation of a ``joint
employer'', which will impact thousands of business owners and their
employees in my district and throughout the country.
I would like to thank Chairman Roe, Committee Staff, the University
of South Alabama, as well as our witnesses and members of the public
here today for being a part of this hearing.
Committee hearings have always provided transparency and a way for
the public to hear their Representatives debate important issues. Field
hearings, however, provide a much more tangible way for our
constituents, like the people of South Alabama, to be directly involved
in the process.
Issues like the National Labor Relations Board's definition of a
``joint employer'' under national labor law affect Main Street
businesses in a real way and it is imperative for Congress to come
directly to the people to discuss the impact these decisions will have
on their everyday lives.
As Chairman Roe explained, the NLRB is tasked with determining
whether two businesses may be considered ``joint employers'' under the
National Labor Relations Act. This definition is then used by the NLRB
to mediate labor disputes and to determine the rights and protections
afforded to employees under national labor laws.
We as a Committee have discussed joint employer status before in
the Browning Ferris v. NLRB case, and it was during that discussion
that the franchise joint employer relationship was brought up. Now as a
former management attorney who has worked in the field for 30 years, it
truly boggles my mind that we are even talking about redefining a joint
employer relationship in the franchise industry.
The franchise model, as a way of doing business, has been around
for decades and represents a win-win for franchisors, franchisees, and
franchise employees. Franchisees get the gratification of charting
their own course and owning their own business while franchisors
benefit from the licensing of their product. As the franchise expands,
more
opportunities are created for both the employees of the franchise
and for the franchisee.
During our last hearing, my colleagues on the other side of the
aisle couldn't understand why the franchise industry was worried about
their status as independent business owners and why franchisors were
worried about what this would do to their business model. The answer is
simple - expanding the definition of ``joint employer'' increases the
liability of doing business, changes the franchisor-franchisee
relationship, disrupts the flow of commerce, and puts long-term job
growth in jeopardy.
These proposed changes will directly impact products and services
that people have come to depend on across the United States. I look
forward to hearing from our witnesses about the impacts this change
will have for business owners and their employees.
______
Chairman Roe. Thank you very much for yielding. And
pursuant to Committee Rule 7(c), all subcommittee members will
be permitted to submit written statements to be included in the
permanent hearing record. And without objection, the hearing
record will remain open for 14 days to allow statements,
questions for the record, and other extraneous materials
referenced during the hearing to be submitted into the official
hearing record.
It is now my distinct pleasure to introduce our
distinguished witnesses. First, Mr. Marcel Debruge is Chair of
the Labor and Employment Practice Group at Burr & Forman LLP in
Birmingham, Alabama. He focuses his practice on representing
management in all aspects of labor and employment law,
including litigation before Federal and State courts and
administrative agencies. Welcome, Mr. Debruge.
Colonel Steve Carey owns and operates CertaPro Painters of
Mobile and Baldwin Counties in Daphne, Alabama, an interior and
exterior house painting contractor, which has won an A-plus
rating from the Better Business Bureau. Colonel Carey, retired,
is a Commandant at the College of Aerospace Doctrine Research
and Education, and the Vice Commander at Air Force Doctrine
Center, Air University, Maxwell Air Force Base, Alabama. Sir,
thank you for your service to our great Nation.
And Mr. Chris Holmes is CEO of CLH Development, Inc. of
Tallahassee, Florida, since its incorporation in 2001. Mr.
Holmes is an area representative for Firehouse Subs in
Southeast Alabama, South Georgia, and North Florida. He has
sold the rights to five Firehouse Sub restaurants in Southeast
Alabama, 15 Firehouse Sub restaurants in South Georgia, and 10
Firehouse Sub restaurants in North Florida. Mr. Holmes also
owns and operates one Firehouse Sub restaurant in Tallahassee,
Florida.
And I might add for the record that we did invite members
from both sides of the aisle to be here, both Democrats and
Republicans. Democratic witnesses were also invited, but
declined.
Gentlemen, I will now ask you to stand and raise your right
hand.
Do you solemnly swear or affirm that the testimony you are
about to give will be the truth, the whole truth, and nothing
but the truth?
[A chorus of ayes.]
Chairman Roe. Let the record reflect the witnesses answered
in the affirmative, and you may take your seat. Before I
recognize you for your testimony, let me briefly explain our
lighting system. You have five minutes to present your
testimony. When you begin, the light in front of you will turn
green. With one minute left it will turn amber, and when your
time has expired, the light will turn red. And at that point I
will ask you to wrap up your remarks. I will not certainly cut
you off mid-sentence. Each member will also be given five
minutes, and we will probably have more than one round of
questioning.
And just before, Mr. Debruge, you are recognized, this is
an official hearing of the United States Congress. And one of
the things I like about field hearings is it does something I
wish we would do more often, which is to bring the Congress to
the people, which is what we are doing here, as opposed to the
people going to the Congress. This is the people's House, the
House of Representatives, and we are here to learn what is on
your mind.
And, again, Mr. Debruge, you are recognized for five
minutes.
TESTIMONY OF MARCEL L. DEBRUGE, LABOR ATTORNEY, BURR & FORMAN
LLP, BIRMINGHAM, ALABAMA
Mr. Debruge. Thank you, Chairman Roe, Congressman Byrne. My
name is Marcel Debruge, and I am a partner at Burr & Forman LLP
in Birmingham, Alabama, and have been practicing labor and
employment law since 1991. For many years, my practice has
focused on representing clients in the manufacturing sector,
primarily in the State of Alabama, but also throughout the
United States. I represent dozens of manufacturing operations
in our State, which employ tens of thousands of Alabamians, and
I have personally visited the vast majority of major Alabama
manufacturing operations.
Our State has had a resurgence of manufacturing jobs in the
past 25 years. By the mid-1990s, Alabama had seen the decline
of its older unionized industries, such as steel, textiles,
chemicals, and paper. Our State understood that it had to
attract new business to create manufacturing jobs for people
with a high school education, and limited work experience and
job skills.
Our State, like many other States in the Southeast,
therefore invested heavily to recruit global automotive, steel,
and aerospace companies, among many others. In many cases,
these marquee companies have attracted dozens of suppliers who
build factories in Alabama as well. The numbers tell the story.
In 1993, not a single automobile was made in Alabama. Today
Alabama employs over 35,000 men and women in automotive
manufacturing, and has produced more than 8.2 million cars and
light trucks. Alabama earns the number two spot on Business
Facilities Magazine's Annual State Automotive Manufacturing
Strength Ranking. This ranking emphasizes growth potential as
well as production figures and industry trends.
Alabama ranks fifth in the U.S. in car and light truck
production. Alabama auto makers produced more than 918,000 cars
and light trucks in 2013. Ten passenger vehicle models are
built by Alabama manufacturers. Alabama's export dollars for
vehicles and vehicle parts totaled nearly $7.1 billion for
2013. And finally, 1/4th of all passenger vehicles built in the
South are made in Alabama.
Alabama's political leaders, both Republican and
Democratic, recognized that the old way of doing business was
not working, so they put the State's resources behind the
recruitment of these new manufacturing jobs. Unlike in the old
days, these post-1990s manufacturing jobs are primarily, but
certainly not exclusively, in plants that are foreign owned,
union free, and staffed with a variety of categories of
employees, such as regular full-time, regular part-time,
temporary, and contract labor.
These new plants are modern, efficient, safe, clean,
flexible, and capable of achieving the highest quality in the
world. They pay competitive wages based on the nature of the
business and the location of each facility. Controlling costs
is vital to their survival because they are forced to compete
with overseas operations in Mexico, Central America, and China.
For example, automotive supplier wages in Mexico are between $1
and $2 per hour. These same types of supplier plants in Alabama
pay 10 to 20 times more than those Mexican wages.
On March 17, 2015, in the Wall Street Journal, an article
appeared titled, ``Why Automakers are Building New Factories in
Mexico, Not the U.S.'' And that article states: ``It has been
more than six years since an automaker picked the U.S. South
for a green field plant, meaning one where the company did not
already have facilities. Such projects have all gone to Mexico
lately.'' Flexibility is critical to Alabama's manufacturing
facilities. It means having the right number of trained workers
and being able to classify those workers in a way that makes
economic sense.
In my experience, most companies rely on a mix of regular,
temporary, and contract labor to operate. It is common to see a
facility utilize regular full-time associates, regular part-
time associates, temporary associates, and on-site contractors
handling tasks such as shipping and receiving, sorting, quality
control, maintenance, and logistics.
A one-size-fits-all approach in which virtually everyone is
performing some task on site as either an employee or a joint
employee is simply not realistic, and, in my judgment, one,
will cause fewer new plants to locate here, two, will put at
risk the jobs we currently have, three, will discourage
existing companies from expanding in the U.S., and, four, will
give foreign manufacturing operations an even bigger cost
advantage than they already have.
Expanding the definition of ``joint employer'' and then
forcing these newly-defined joint employers to negotiate
together with a bargaining unit comprised of people who work
for different employers is not the way to promote flexibility,
contain costs, and increase competitiveness. It will result in
more litigation, more labor unrest, more strikes, more
picketing, more union organizing drives, and ultimately fewer
jobs.
Thank you.
[The statement of Mr. Debruge follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Roe. Thank you. Colonel Carey, you are recognized
for five minutes.
TESTIMONY OF COLONEL STEVE CAREY (USAF, RET.), OWNER/OPERATOR,
CERTAPRO PAINTERS OF MOBILE AND BALDWIN COUNTIES, DAPHNE,
ALABAMA
Mr. Carey. Yes, sir. Chairman Roe, Congressman Byrne,
distinguished members, it really is a pleasure to be here and
testify before you today. I am the owner of CertaPro Painters
of Mobile and Baldwin Counties. We are a licensed, bonded, and
insured residential and commercial painting company.
I appear before you on behalf of the Coalition to Save
Local Businesses and the International Franchise Association.
I, like my fellow witnesses here, am extremely troubled about
the National Labor Relations Board's expanded application of
``joint employer,'' and the very real threat to my business
that a new joint employer standard brings.
As a small business owner, entrepreneur, and franchisee, I
believe that the NLRB is doing Congress' job in making a new
law by inventing a new definition. This new standard seems to
ignore all the precedent in federal labor law and threatens the
livelihoods of small business owners like myself.
As background, the Coalition to Save Local Businesses is a
diverse group of locally owned and independent small
businesses, associations, and organizations. This group is
dedicated to protecting and strengthening all sectors of small
business, which are now under attack by the NLRB.
My wife, Charlotte, and my three children, Clark, Camille,
and John Charles, and I moved to Mobile seven years ago after I
retired from my short 30-year career in the Air Force. I am a
combat veteran, flew F-15s and F-16s, squadron commander,
instructor pilot, and mission commander. My leadership position
was at Maxwell Air Force Base at the College of Doctrine and
Research.
When I retired, I wanted to settle near a close-knit
community. I had drug my wife around the world for some 15
years, and she said, ``We are going back to Alabama.'' So we
settled down here, and I decided to start a career as a small
businessman. I transitioned to a successful career in
franchising. I want to highlight the fact that the
International Franchise Association's VetFran initiative has
been very helpful to veterans like myself. In fact, over 75,000
veterans and their spouses have become franchise business
owners and employees in various franchise industries.
During my Air Force career, I developed the characteristics
and honed the skills necessary to run what I consider a world-
class organization. I transferred those skills into my second
life as a small businessman and franchisee. The skills include
things like leadership, professionalism, integrity, and
attention to detail. That is how I could walk away with an A-
plus rating from the Better Business Bureau, how I can put my
face on the side of my truck and tell people I bring certainty
and integrity into your home. I generated a brand for the
painting industry in southern Alabama that is unmatched, and I
am proud of that. And I can look back at my Air Force career
and say a lot of the things I learned in terms of leading men
and women have carried through to me now as a small
businessman.
Locally, I serve on the executive board for two chambers,
Eastern Shore and Mobile. I am director of the Foundation for
Workforce Development, and vice chair of a student group called
the Student Training and Exploration Program. I also serve in
Mobile as the vice chair for Military Affairs where I help
build public awareness and promote veteran issues with local
businesses, hosting a military appreciation luncheon at our
local USS Alabama battleship. I was recently selected to serve
on the Alabama Red Cross Board of Directors, and I now have a
state appointment to the Alabama Aviation Hall of Fame
Directors Board.
I am a strong supporter of education for our youth, and as
president of our South Alabama Air Force Association, we go a
long way to improve science, technology, engineering, and math
for our young men and women, and that carries right through
here to our Air Force ROTC detachments at the University of
South Alabama.
I was asked why did my wife and I pursue a career in
franchising. When I retired from the Air Force, we spent a lot
of time deciding what would be best for my family. I had a
business bug. I had an MBA. We explored the idea of purchasing
an existing business and considered both independent businesses
and franchises themselves. We decided that the franchise
opportunity would be the best fit for our family because it
allowed me to run an independent business, but still be able to
work with a proven brand and a solid business model.
I purchased CertaPro Painters as a franchise in 2008,
probably not the best time in the course of business history to
buy a franchise. But immediately I was profitable and ran a
smart, lean, good business operation. It was a good fit for me
because it was a service business based on working with people,
and getting out of the office, and spending time with
homeowners as well as commercial clients that had a particular
need.
CertaPro offers a 10 percent discount to all franchisees
that are veterans like myself, and when I decided to buy that
franchise, they put out their hand and said we thank you for
your service, we want you to be part of our team. And that is
exactly what I felt like when I joined and bought my franchise
from CertaPro.
The agreement, in my view, is fairly simple. It is pretty
thin, but it is very detailed and very precise. What they do is
they help me with brand materials, including trademarks and
logos, estimating and project management tools, software, and
some marketing. But in all other aspects, I operate as an
independent stand alone business, just like any non-franchise
small business owner. I have the autonomy to run my business as
I see fit. I make the decisions every day, and that is what I
bought into, not to be told what to do.
Much like my time as a commander in the military when I
sent young men out flying F-15s or F-16s in harm's way, I did
not expect myself to sit back at the headquarters there and
pass to them decisions and make radio calls that they would
then have to act on. I wanted them to be independent. That is
the way I operate my business. I want to be independent. I want
to lead my business, make decisions, and grow my business so
that I have a legacy for myself and for my family.
Small businesses like mine play a valuable role in our
community, not only in opportunities, but also in the growth of
the local economy. We provide entrepreneurial opportunities for
people looking to create new jobs and grow. Small business is
bracing for the NLRB's decision for the forthcoming Browning-
Ferris case, a decision that some expect may come as early as
next week. I am not a lawyer, but there appears to be little
suspense about where the NLRB is headed, and I want to be sure
that we make the right decisions.
Fortunately, after I retired from the Air Force, the
opportunity for small business presented itself with the
franchise of CertaPro Painters. I probably would not have
signed up to take on the work and the hard dedication it takes
to run a business had I been handcuffed with a change in
definitions.
Mr. Chairman, I strongly urge this committee to consider
the devastating impact on small business owners that this may
have. I ask you to do what Congress can to ensure that the NLRB
cannot take away the livelihoods of small business owners like
myself.
I thank you for this opportunity.
[The statement of Colonel Carey follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Roe. Thank you, Mr. Carey.
Mr. Holmes, you are recognized for five minutes.
TESTIMONY OF CHRIS HOLMES, AREA REPRESENTATIVE, FIREHOUSE SUBS,
AND CEO, CLH DEVELOPMENT HOLDINGS, INC., TALLAHASSEE, FLORIDA
Mr. Holmes. Thank you. Chairman Roe, Congressman Byrne,
thank you for the opportunity to testify before you today. My
name is Chris Holmes. I am the area representative for
Firehouse Subs in Northern Florida, South Georgia, and
Southeast Alabama. I currently own and operate one Firehouse
Subs restaurant in Tallahassee, Florida, and led the
development of 30 other Firehouse Subs restaurants in this
region of the country.
I am here today to discuss my concerns regarding the
National Labor Relations Board's attempt to expand the
definition of what constitutes a joint employer, and the very
real threat of that effort to not only my business, but
thousands of small businesses like mine throughout the country.
Changing the definition will have a significant impact on
another definition as well, the definition of the American
Dream. As a small business owner and an entrepreneur who
started off my career as a 16-year-old kid working at a local
McDonald's, I embody that definition every day. From the first
job, I pursued a career in the restaurant business, working my
way up the ladder of the industry from dishwasher, to manager,
to district manager, and now to a business owner, who has the
privilege of testifying before the United States Congress. What
an amazing journey, but yet at the same time, what a typically
American one.
I am here today because I believe that dream may be in
jeopardy. Our story is not unlike millions of other small
business owners. My wife and I decided that after numerous
roles in the industry, we wanted the independence of owning and
operating our own small business and the ability to take
control of our family's financial future. As we looked for
those opportunities, we became associated with Firehouse Subs,
and for the first time were exposed to the franchise business
model.
For us, this was the perfect scenario. We could run our own
independent business, while at the same time participating with
an exciting and growing brand that customers clearly loved. The
ability to franchise was our entry point into small business
ownership. So we did what so many other entrepreneurs have
done. We took out second mortgages. We sold everything that was
not nailed down. We maxed out credit cards and even borrowed
money from our parents. The franchise model opened the door for
ourselves and millions of others just like us to pursue small
business ownership. Without it, we would never have been able
to realize the dream.
Franchising is an often misunderstood, but actually a very
simple and effective model. My arrangement with Firehouse of
America is very straightforward. They provide the brand
materials, including the trademarks and logos, recipes,
significant marketing support, and countless other resources to
maintain consistency across the brand. But in all other
respects, I operate as an independent stand-alone business,
just like a non-franchise small business owner would.
I have the autonomy to run my business as I see fit,
including on matters such as staffing, labor costs, vendor
relationships, among others. I do all the hiring, all the
firing, and I set the wage rates for my business. Firehouse of
America has no role in this. It is my business.
I believe, however, the new joint employer standard, if
allowed to go forward, will irrevocably change that model. If
the larger franchisor is now liable for the employment
decisions of their service providers, franchisees, or other
contractors, then they would have no choice but to be
completely involved in those decision making processes. I will
have lost my autonomy, my independence, and potentially my
investment.
Instead of being a small businessman, I would become
virtually overnight a manager for a large company. While I have
played that role before and certainly do not begrudge that, it
is not what I aspire to. I took the risk to start and run a
small business, but now I find myself in the position of
potentially having an unelected board in Washington, D.C., just
unilaterally determine that my American Dream is over. Could
that really be possible?
For us, our business has been the site of a family reunion
that has lasted close to 20 years, where our children, our
brothers and sisters, our nieces and nephews, and even our
parents have all worked in the restaurant, collectively
building the security of multiple generations of our household.
And it is a place where the careers of hundreds of young people
began their own journeys that would have never happened if it
were not our business and our opportunity to pursue our dream.
While it is quite clear that the NLRB wants to negatively
impact the business model of some of America's largest
companies through this action, it is ironic that what they will
actually be doing is hurting America's smallest businesses. The
real effect will be small franchisee operators essentially
losing their business to an often larger franchisor, making the
large company larger and the franchisee extinct. If your goal
is to push small business operators to the curb and stifle
investment into new startup businesses, you could not come up
with a more effective tool than this joint employer decision.
Mr. Chairman, Congressman Byrne, it is my hope that you and
your committee will do everything in your power to ensure that
the NLRB is not able to finalize this decision. My small
business and the security of my family are riding on it. Thank
you again for the opportunity to share my concerns with you.
[The statement of Mr. Holmes follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Roe. Mr. Holmes, thank you very much. I will now
recognize myself for five minutes. And, Mr. Holmes, when I was
16, actually 15, at a scout camp, I washed 350 dishes three
times a day, and I determined that I did not want to be in the
restaurant business after that summer--
[Laughter.]
Mr. Holmes. I understand.
Chairman Roe.--for the rest of my life, although I did
spend the next six years running the dining hall, but I got
that all out of my system as a young person.
I think the three of your testimonies have really made me
angry because what I hear is I hear people who went out, took
the risk, and invested their life savings into a business now
to maybe have it taken away from them by not five, but three
unelected bureaucrats in Washington, D.C., who think they know
better about how to run your business than you do.
And my question is to you all to start with, what do you
all see, and maybe, Mr. Debruge, you could start this. What is
the motivation of the NLRB because their purpose, I mean, it is
very simply, clearly written what their purpose is. And I
always thought, you know, I am an old basketball player, and I
thought when I went on the court there were a set of referees
out there that gave their best estimate about what the rules
are. You knew what they were, and you played by them. This NLRB
is not doing that, and they have definitely shifted it in favor
of the unions. And I just wonder what you think their
motivation is. It cannot be to help these gentlemen right here
because they clearly said it is not helping them.
Mr. Debruge. Well, from my perspective, the motivation is
pretty obvious: it is to increase the number of people who pay
union dues. The current leadership, the current board, is
focused almost exclusively on how to expand union membership in
the private sector. Today, since World War II, unions have
dropped from roughly 40 percent of the private sector workforce
to--I think the number is--6.6 percent today. They are almost
an afterthought in most industries, especially anything built
in the last 25, 30 years.
The Wagner Act was enacted in 1935. It was not really
amended in any meaningful way until 1947 with Taft-Hartley, and
it has kind of stayed the same since then. It is outdated, it
is outmoded, and it adheres to a 1930s model, a New Deal model
that collective bargaining is the way to ensure economic
stability, a safe, fair workplace for workers, and rights on
the shop floor. That model no longer applies in the 21st
Century in the global economy. The National Labor Relations Act
is completely outmoded when it comes to the vast majority of
industries today in this country, especially manufacturing.
So the NLRB's focus has become incredibly politicized. It
has almost dropped any pretense of being an arbiter or a
referee, Mr. Chairman, as you put it. And the goal simply is to
find ways to expand union coverage to increase that 6.6 number,
and by expanding the definition ``joint employeer,'' and then
requiring multi-employer bargaining units, which to me is truly
disturbing. Everything we have heard is disturbing, but the
thought of taking all these newly-created joint employees,
cramming them into a single bargaining unit, and requiring
bargaining with multiple employers who do not agree to it, I
think is a recipe for disaster and inefficiency, and it is
going to kill jobs.
Chairman Roe. I think one of the things in the joint
employer model that they are looking at was just rebutted by
both Colonel Carey and Mr. Holmes. And I heard Mr. Holmes say
very clearly, as clear as I can understand it, I run my own
business as I see fit. I think that is what he said. Certainly
you have logos, and models, and business models out there to
help you promote your business, but you run your business, and
what they are saying now--I totally agree.
And the example I use is as a medical office, as a private
small business owner, we contracted out our janitorial
services. We did not do that, but every day we had certain
standards in our office, but they did not work for me. And if
they were not doing the job, I asked them to get people who did
do the job. Did that mean I was the employer? Well, under this
NLRB, the answer would be yes. I would be the employer. It is
ridiculous. I was not the employer. We bid that contract out
every year or two, and I am sure you do the same thing with
many things you do, bid out.
So would you just again for the record talk about, and
Colonel Carey, if you would, about how this would affect your
business. If you no longer had day-to-day control over the
people, because I heard you say you very much prided yourself
in going into homes, taking the expertise that you had learned
as a military officer for 30 years, and put that in the
business world. How would that affect how you run your
business?
Mr. Carey. Sir, before I answer that, just another add-on
here from a subtle standpoint with what the situation presents
is, in my view this is about control, control at a higher level
versus at a lower level, ``lower level'' meaning the small
businessman. My time in the military, and I will use this as
kind of an analogy. Our Air Force is the greatest air force in
the world. It even is today. The reason it is, is because we
have autonomy in the cockpits of the young men and women that
fly out and have their missions.
In the Soviet Union that was not the case. The autonomy did
not exist. Those young men and women in the Soviet aircraft,
they were completely controlled by the senior officers sitting
on the ground. That is the same situation just in a business
perspective that we face here is that we are moving the power
and decision making up to a higher corporate level, which then
disables businessmen and even the employees underneath to be
independent, to have the initiative that they need to run a
good business, and to really create some style and character as
a local businessman.
To answer your question, though, when you talk about the
impact on me is, you know, I have a great deal of pride when I
walk into those homes. I love it when I walk into a store and
somebody goes, ``Hi, Steve.'' And maybe it is a homeowner that
I met three or four years ago, but they recognize me not as
CertaPro, but as a local businessman. That independence, that
sense that I am a small local business owner would disappear if
I became just a puppet or somebody that was mimicking a lot of
what I was told to do.
And I take a great deal of pride in being able to shape my
business because from a franchisee standpoint in the case of
CertaPro, there are 350 of us out there. All of us run
dramatically different businesses. How I run my business in
Mobile, Alabama, is not the same as Philly, not the same as San
Francisco, not the same as the middle of Kansas. I tailor it to
my market, and it is the decisions and risks that I take as a
business owner because I am at that level, I am in the weeds.
If that is taken away from me, if I am told what to do, how
to act, and how to respond, then I am probably going to lose
the desire and the initiative to really run my business and
work as hard as I do. And that is what I signed up for. I tell
many folks now that I work harder now as a small businessman
than I did as a colonel commanding hundreds of men.
Chairman Roe. I believe that.
Mr. Carey. And it is an 8-day-a-week job.
Chairman Roe. My time has expired. Mr. Byrne, you are
recognized.
Mr. Byrne. Thank you, Mr. Chairman. Colonel Carey, how many
people do you employ in your business?
Mr. Carey. I have three employees, but I use mostly
subcontractors.
Mr. Byrne. And how many subcontractors on average?
Mr. Carey. Seasonally on average I would probably say
individually probably in the 30 range.
Mr. Byrne. Okay. And, Mr. Holmes, how many people do you
employ in your restaurant?
Mr. Holmes. In the one restaurant that I own and operate,
we have approximately 20 people.
Mr. Byrne. Okay. So what we do is we take your small
businesses and we multiply that by hundreds of thousands of
similar businesses.
Chairman Roe. Mr. Byrne, when you all answer the questions
for the questions, could you all speak a little more directly
into the microphone, bring them up a little closer to you?
Mr. Byrne. When you multiply those numbers of employees,
subcontractors included, by hundreds of thousands of
businesses, you see an enormous impact on the American economy.
You are creating millions of jobs, and sometimes we get lost
when we look at the big employers, and I am all for employment
at whatever level. But you are creating millions of jobs for
people that probably would not have them without you.
Not only that, Colonel Carey, I know what you are doing in
our community. You get hit up all the time for providing this
or that and contributing this or that, and you do it because
you want to be a part of your community. Mr. Holmes, I am sure
you are doing the same thing in Tallahassee.
Mr. Holmes. Yes, sir.
Mr. Byrne. So not only are you providing jobs to all these
people, you are an integral part of your local community. We
depend upon people like you. Colonel Carey is one of our big
leaders in our Chamber of Commerce. I mean, you are the bedrock
of our communities, and the idea that we would change the law
and take the employment opportunities away from all your
employees and the support you give to our communities not only
as small business people, but active in your communities, is
just beyond me why we would think that is a good idea.
So I want to say I appreciate what you do, and I know you
did it because you were trying to do something right for your
family. But by doing something right for you and your family,
you have benefitted your communities and the Nation. And so, I
will pledge for myself, I am going to do everything I can to
try to preserve this, not just for you, but for years to come.
Mr. Debruge, your testimony was compelling. I am a native
Alabamian, and I am very proud of what we have accomplished in
Alabama just since 1993. You mentioned the automotive industry.
In 1993, we did not have a single steel plant in Mobile County.
We have three now that employ over 4,000 people. Really great
jobs, pay great wages, provide wonderful benefits.
But they did not just show up here. We worked as a
community hard to get them to come here. We worked hard to get
those steel plants. We worked hard to get Austal Shipyard. We
have worked like crazy to get Airbus to open up here, which
they are going to open up next month, and we hope that there
are a whole bunch of suppliers coming with Airbus.
Now, what happens to that economic development model for
Alabama, and for southwest Alabama, and for other southern
States because a lot of southern States have done it, what
happens to that if the NLRB changes the joint employer
definition?
Mr. Debruge. I think, and I will try to be succinct, a
couple of things. First, it is going to be more expensive to do
business here. The labor costs are going to go up, efficiencies
are going to go down. And I think the best example I can give
you is what happened, the painful memory of 2008 and 2009. And
as I listened to CNBC and Fox Business yesterday I had a
flashback to what that felt like, lest we forget.
General Motors went bankrupt, Chrysler went bankrupt, and
they had to be bailed out. For a variety of reasons they went
bankrupt. The root cause is people did not have the money or
the credit to buy cars, and they could not adapt. They were not
flexible, and they were weighted down by union contracts, so
that made it incredibly difficult to respond to the market.
By contrast, all of the plants in Alabama stayed open.
Toyota stayed open. BMW stayed open. The transplant operations,
as we would call them, were flexible. They had a contingent of
temporary workers that they were able to shed in order to keep
their regular people employed. Every company approached it in a
different way, but the bottom line is these union free diverse
workforces with different categories of employees and
contractors were able to respond to those market conditions.
We still have those jobs in Alabama, and they have
increased exponentially since then. Every one of our major
manufacturers has expanded. And so, if all of a sudden their
ability to be flexible, to staff their plants in the way they
need to staff them is taken away, and this one-size-fits-all
approach is imposed on them, and they have to collectively
bargain, along with multiple employers, with a diverse
workforce, it spells disaster, in my opinion.
Mr. Byrne. Well, thank you for that. Thank all of you being
here. My time is up, and I yield back, Mr. Chairman.
Chairman Roe. Okay. I thank the gentleman for yielding.
Being an employer for 30-plus years, I think the person who
signs my paycheck is my employer. In my case it is me, but
whoever writes that check to me is who is employing me, I
think. Would you all agree with that?
Mr. Holmes. Yes, sir.
Mr. Debruge. Yes.
Chairman Roe. Mr. Holmes, if somebody is working in your
restaurant or, Colonel Carey, you are servicing a home,
painting a home, when you sign that check, it is not CertaPro
that signs that check. It is you. It is Steve Carey that signs
that check and puts it in the mail. That is who those employees
work for.
Do you all see this, if this joint employer status, if the
NLRB rules that way, do you see this as promoting job growth in
this country or stifling job growth in this country?
Mr. Carey. Well, I think it will stifle it. In my view,
small businesses, in particular, at my level of business, and
even the independent-owned businesses, we are a fragile entity.
A lot of times we kind of just hover on the edge of success and
failure tied to the economy, tied to weather. If I can have the
flexibility to make critical decisions, to trim employees at
the right time, to be more aggressive in a certain marketing
venue, and I make those decisions based on my business
assessment, I stand a much higher likelihood of being
successful, whereas if I am driven to kind of follow a model,
to sort of march in line with what a larger company decision
above me has enforced upon me, then I am less likely to show
that flexibility and to survive, which is what it honestly
takes at the lower levels of business.
Chairman Roe. And what I see with the franchise model, as
you pointed earlier in your statement, is what is going on in
Kansas may not be going on in Mobile, Alabama.
Mr. Carey. Exactly.
Chairman Roe. It may be very different. And the business
conditions and environments there may be different, and that
allows you to adapt very quickly. And that is one of the
reasons I think the franchise models work so well in the
country and why almost 9 million people work for it. It can
turn on a dime.
And even though McDonald's, let us say, is a huge
corporation, most of them are run by just local people in local
communities. And so, they can adapt to the local environment
much more quickly than somebody in California, where their
headquarters is, can adapt to it.
Mr. Carey. Here is a great case in point. Four or five
years ago, I was pretty new to the franchise business, and I
wanted to invest in TV, which is a lot of money for a very
small business like mine. The corporate folks at CertaPro, you
know, they offer advice, but they said, you know, that is
probably not a good idea for you, you know. It will put you at
a higher risk. I--as the business owner--made that decision at
a risk to myself, and it was a great decision because it
catapulted me quicker in terms of branding and my market.
But, again, that was my decision, and I could either be
successful or fall on my own decisions, but that is what we
want to hold onto. That is what makes us, you know,
entrepreneurs and businessmen.
Chairman Roe. Here is another question I have, and this is
to Mr. Holmes, basically two questions. One, what are the
benefits, and either one of you can answer this, of buying a
franchise instead of opening an independent restaurant? In
other words, what is the benefit of the brand to you as a
business person?
Mr. Holmes. Well, just using the sports analogy that you
mentioned earlier about basketball, it is sort of like having a
great game plan for a coach, whether it be, you know, football
or basketball, and they have, you know, the playbook, and this
playbook works. And we have seen it. It is Coach Wooten's
playbook, and it works. So I would want to take that playbook,
and I would want to execute that playbook, and then that would
help me be successful. That is the same with franchising.
Franchisors have a successful playbook. They have the logos,
they have the recipes, and they have the procedures; all those
things already in place for you to be successful.
So it removes a lot of the risk. It does not remove all of
it as an operator. You still have to go out and secure jobs and
get business, and then you have to satisfy those customers, but
you already have the big part taken care of. You do not have to
create something that causes a lot of risk. You already have
that in your playbook.
Chairman Roe. It is a proven business model.
Mr. Holmes. Yes, sir.
Chairman Roe. That is what it is. As a former employee at a
quick service restaurant, quick business, why did you decide to
become a franchisee instead of moving up the ranks in the
corporate structure? Why did you do that?
Mr. Holmes. Well, like I said in my testimony, I was
actually a dishwasher at 19, and was able to move up with that
corporation as a district manager of ten steakhouses. And
through different things that happened to our corporation, it
was buy-outs. They got bought out several times, which created
a lot of debt. It removed a lot of the opportunity, and then we
were faced with some bankruptcy in that steakhouse chain.
So I went that route, I tried that ladder, and someone else
controlled my destiny. Someone in a board room or on the stock
market, I do not really know, but it was not me inside those
four walls of that restaurant. So owning my own business was
very appealing because I controlled my own destiny. And so, the
franchise model, after I was exposed to it, was a great step to
that because it removed some of the risk of, you know, going
out and creating my own thing.
But now on a daily basis I control my own destiny. And I
will add really quickly, when we talk to business owners, it
used to be that just finding good people was some of the
biggest threat. Finding good people to work with, finding great
customers, and just continuing the profitability of your
business. Now we say our biggest threat is government
regulations. That is our biggest threat.
Chairman Roe. My time has expired. Mr. Byrne, you are
recognized.
Mr. Byrne. Thank you, Mr. Chairman. When I was listening to
you talk, Mr. Holmes, I was thinking about a biography of
Benjamin Franklin I read a couple of months ago. He was a small
business guy.
Mr. Holmes. Yes, sir.
Mr. Byrne. He had a print shop, and he organized all the
other small business people in his community, and they worked
together to try to help one another, and that is what built
America. And when he was sitting there in the Constitutional
Convention, I know he had in his mind, because that was his
background, what is going to help create the environment in
which people can do what I did, which is start my own business
and make it grow, where I take responsibility, and I employ
people?
And I cannot imagine that he and the other people that sat
in the Constitutional Convention would have dreamt in a second
that the government they were creating would take away from
people the opportunity to create that. So I just wanted to
offer that.
But also I want to go back to both you and Mr. Carey. What
does this do to your employees? I mean, we are concerned about
you obviously, but what about your employees, the people you
employ? If this definition is changed, what is it going to do
to them?
Mr. Carey. You know, as I created my business, one of the
things I have tried to do is to create a culture within my
small business. Although most of my painters are
subcontractors, I want them to understand that we are
delivering something from the standpoint that they have never,
ever thought about. I want my painters, my supervisors, my
production managers, to look at me, to look at the business
with pride. And sometimes you tend to lose that identity of a
small business of what you can represent if you become big. The
more global you are at the lower levels, it is a lot harder to
identify.
So in my case, I think it is easier for my painters, my
subcontractors, to identify with a guy or a gal, Steve Carey
sitting there, you know, trying to build a culture, and you
create loyalty when you do that. And from that loyalty, you
create pride, and you can grow the professionalism and the
brand at a small local level. But we risk losing that, the
identity of that small business if we become, you know, in a
position where we are driven by a larger--
Mr. Byrne. You have got a closer relationship between you
and your employees than if they are working for some big
company.
Mr. Carey. Right.
Mr. Byrne. And that benefits them because they can come and
see the owner of the company, just walk in your office to see
you.
Mr. Carey. Right, and they do.
Mr. Byrne. Mr. Holmes, what about your employees?
Mr. Holmes. Well, I mean, I agree with Mr. Carey. The
upside to this is very limited. The downside to this going into
effect is huge. There are already systems in place to represent
our employees if they are being mistreated in any way. So I
think the result will be they will lose opportunity in the
future. It will be removed from them.
We have just in my Firehouse Subs a history, I have an
employee that now owns his own Firehouse. He started with us as
a college student, got out of college and he and his father-in-
law opened their own Firehouse Subs. They own two restaurants.
I have a general manager that owns his own Firehouse Subs now.
I have another general manager who owns his own Firehouse Subs
now. Both of those gentlemen worked for us for eight to ten
years. I had an inspector, you know, he would go around helping
people out, that worked with us for years. He now owns his own
Firehouse Subs.
And so, you know, with that, this regulation will basically
remove all that opportunity, every bit of it. So I look at it
as we are removing the opportunity in the future for the
employees.
Mr. Byrne. Mr. Debruge, you and I both have practiced in
this field for a long time. How big a change in precedent would
this change in definition be?
Mr. Debruge. I think a good way to illustrate this, and I
do not want to upset or depress my fellow panelists any more
than they already are.
[Laughter.]
Mr. Debruge. But I do not think they really see the train
that is coming from the other direction. The focus rightly is
on control from the top and the loss of flexibility. The NLRB
is about unions and the National Labor Relations Act. They are
looking at liability for unfair labor practices possibly, the
idea of secondary action, them being pulled in as joint
employers and no more immunity from secondary boycotts,
strikes, or picketing.
But also, and this may be the most chilling thing, they may
have labor contracts imposed on them because if they are in a
joint employment relationship now, and let us say, for example,
the Teamsters can organize, on a nationwide basis, everyone who
is an employee or even a subcontractor of these entities. And I
cannot think of anymore interference with their direct
relationship with their people or the loss of flexibility and
control than to have a national labor contract imposed on them
through this new definition of joint employment.
It is really difficult even to comprehend that we would go
down this road in this 21st Century economy with the sort of
workplaces that we have. It makes no sense at all, unless your
goal simply is to try to get more people to belong to labor
unions.
Mr. Byrne. Thank you, Mr. Chairman. I yield back.
Chairman Roe. Along that line, the NLRB's job and purpose
is to--look, I grew up in a union household. Full disclosure:
my dad belonged to a union, worked in a factory, and basically
he had a right to belong to that union or not belong to that
union. He had a right to vote and so forth, and that is fine.
In America you can do that if you want to do that.
This current NLRB, for the record, has pushed ambush
elections. Before we had union elections in 38 days. It takes
40 days to take a chicken to where you can eat it, and that is
pretty quick I think. 38 days: that is the average time. It
would give employees and employers a chance to understand what
it means. If they want to vote for a union, fine, they can do
it. Now that is 11 days.
As an employer, I could not find you in 11 days to have you
represent me to get a labor lawyer. Two micro unions, and not
for the small business people, but where you have a business
like a Bergdorf Goodman or others where you have the shoe
department, the women's department is different than somebody
else. You cannot cross-train people. People cannot move up, as
Mr. Holmes talked about.
And, Mr. Holmes, I could see the pride in your face when
you talked about the people that work for you that now are
small business owners and succeeding. I mean, we want people to
succeed in the workforce. If you get good employees, they will.
Card check. We have a bill out there, the Secret Ballot
Protection Act. Colonel Carey put on a uniform and for 30 years
protected this country so we have a right to vote. And I say
this, I have said it publicly, my wife claims she voted for me.
Maybe she did, maybe she did not. She had a secret ballot.
[Laughter.]
Chairman Roe. She said she did, and I assume she did, but
that is what it is for. Why in the world would we give that up?
I was elected by a secret ballot. The President was elected by
a secret ballot. Why should anybody not be elected by a secret
ballot? And this NLRB is the most activist NLRB in the history
since 1935 when it first came into being.
And, Mr. Debruge, I want to ask you a question today. I
want this for the record. We have heard a great deal about the
joint employment and the franchise system. However, the
potential holding in Browning-Ferris will apply beyond the
franchise system. Who else will be affected by this decision?
Mr. Debruge. Virtually everyone who is involved in any kind
of arrangement whereby they use different categories of labor
in their business on their worksite, people who use temporary
employees, contractors, subcontractors. You know, I have talked
about manufacturing, but really any entity, Mr. Chairman, where
today the company, it is clearly defined employees in these
other categories, they are going to be impacted.
Chairman Roe. So once you have started down this slippery
slope, there is no end to it then.
Mr. Debruge. Yes, sir.
Chairman Roe. Almost any employment arrangement could
almost be identified. Am I correct on that?
Mr. Debruge. You are absolutely correct, yes. This new test
is nebulous. Looking at the economic or the industrial
realities, it is just almost a blank check for the NLRB to
create these joint employment relationships whenever it wants
to.
Chairman Roe. So as I was telling you before the hearing
started, in a large distribution center, I will not mention who
they are, but I was in one the other day, which was huge,
million square feet. And obviously during holiday times, be it
Christmas or, you know, maybe Valentine's Day, when business
picks up, they hire temporary employees. Would it affect them
also?
Mr. Debruge. They could very well be, yes, sir.
Chairman Roe. Okay. I guess one of the other questions for
Colonel Carey and Mr. Holmes is how much involvement does your
franchisor have in the daily affairs of your staff in running
your business day-to-day. When you get up in the morning, when
you leave this hearing, and you guys go back to work tomorrow,
today, this afternoon, are you going to call CertaPro and say,
Mr. Jones worked eight hours today? How much do they do each
day if they affect your business?
Mr. Carey. None.
Mr. Holmes. None. The same, none. We do not communicate on
employee relationships like that.
Chairman Roe. Both of you are truly independent, meaning no
strings, independent business owners.
Mr. Carey. Very, and that is what I love about it. The good
part, though, too, is I do have a hotline. I mean, I have a
phone that I can pick up. I can call one of my other
franchisees to ask for advice. I can call at the corporate
level to say I have got a scenario here, what have you seen
occur with other businesses. So that conduit of experience that
can help me make the right decisions, I have that open channel.
But beyond that and beyond the normal guidance that they
give for branding and standardization, I do not have daily
engagement with them. I mean, maybe once a month I reach out to
them, but generally I do not.
Chairman Roe. Well, what I have heard today in this
testimony from all of you all and Mr. Byrne is that I think it
has been fairly clearly laid out what the motivation of the
NLRB is, and that it will be deleterious. It certainly will
interfere with your business model. It may stop it all
together, but it will certainly make it harder for you to grow
your business. And you did not go into this, but Mr. Holmes has
already been through that experience once. And I think we see
what the motivation is.
With that, I yield to Mr. Byrne.
Mr. Byrne. Thank you, Mr. Chairman. When we were in a
hearing on this or perhaps another topic in Washington a few
months ago, some of our colleagues from the other side of the
aisle were saying, well, you know, we are acting as if we are
assuming the NLRB is going to make this type of decision or
that type of decision, and we do not know that.
And I said then and I am going to say again, I know exactly
what the NLRB is going to do. This Board is going to do
whatever the union wants them to do, and that is not the way
this was set up. Mr. Debruge, I think the Chairman put it very
well: The Labor Board is supposed to be our referee. It is not
supposed to come down on the union side, it is not supposed to
come down on the management side, but keep the equilibrium that
was established under the law.
This Labor Board is trying to definitely weight tilt this
equilibrium away from that balance and to one side. And it
really does not matter which side it is because the law was set
up to maintain the balance. So I think I know what the Labor
Board is going to do. They are going to continue to do
everything they can to help unionization.
And I really think, Mr. Chairman, that ought to be up to
the employees. And to take away from the employees by these
sort of backdoor methods the ability to work with their own
employers, people that are local to them, people that they
know, that they see face-to-face, is just un-American. But the
political environment we are in, that is the reality, and this
Labor Board is going to continue to do that.
And I would be interested, Mr. Debruge, is there something
you think that we could do in statutory law that could rectify
this?
Mr. Debruge. Assuming you could ever get it through this
Congress, of course. There could be modifications to the
National Labor Relations Act. There could be language inserted
to prohibit multi-employer bargaining units, for example. There
could be clear direction in the statute about who is and who is
not an employer, defining these joint employer relationships.
Mr. Byrne. We would essentially--excuse me--put it into
statute what has been the recognized precedent of the Labor
Board for decades.
Mr. Debruge. Yes, sir, or if there is a way to limit the
ability of the Board to do through regulatory fiat, you know,
what they are accomplishing. And, Congressman, you make an
excellent point, as does the Chairman. The Board was not
intended to be an advocate for one side or the other. It was
supposed to enforce the National Labor Relations Act.
This Board over the past several years, I think, has done
lasting damage to the entity, to the concept. Day in and day
out, Board agents, long-timers, 30-plus years people shake
their heads and are surprised at what is happening in
Washington at the general counsel level in particular and with
obviously the Board itself.
And I cannot speak for them, obviously, but the impression
I get is they feel like the damage is almost irreparable, that
people are going to expect now with every political cycle it to
sort of be just whose turn is it to do this, or to fix this in
kind of tit for tat. And that is not good for labor. It is not
good for employers. It is not good for the country.
And I think in Europe and in Asia, they look at this model
and they must just shake their heads in disbelief, that we
politically do not have the will to fix this, to put in place a
system that actually works, that protects employees, that
encourages job growth. But instead we adhere to this fatally
flawed system that we have had since 1935, and we are watching
it be manipulated.
Mr. Byrne. You know, there is a reason why all these
foreign companies are located here. We provide them a labor and
employment environment and quality employees. Let us face it,
it is the quality of our people, and they are coming here
because they want to take advantage of that. And as a result,
if you look at the American economy versus the economy of other
countries around the world--I will not pick any--the American
economy is where everybody is looking to say there is the
bright spot right now. Not a whole lot of bright spots watching
the stock market in the last several days. We are the bright
spot because we have maintained this sort of freedom of
activity by both employers and employees.
And now we want to take it away and remove the one bright
spot that we can offer to the worldwide economy? Mr. Chairman,
I just do not get it. I do not know why in this environment we
would want to do something like this. I understood what Mr.
Debruge was saying that we got to get it through the Congress
and that there are some hurdles to that, but my mother always
taught me you got to start somewhere.
And I just think, Mr. Chairman, we have got to start
thinking about legislation and maybe it does not pass this
year, maybe it does not pass next year. But we are going to
have to pass some legislation to enshrine in statutory law what
has been the NLRB precedent for decades to make sure we
preserve a system that has worked for decades.
And I yield back.
Chairman Roe. I thank you. I think of the old adage ``if it
is not broke, do not fix it.'' When you have got something that
has already provided 9 million jobs and billions of dollars to
the U.S. economy and is growing, why would you want to stifle
that unless you had another motive?
You know, I was standing in Beijing, China, two and a half
years ago, with this committee on a trip. And it dawned on me
when I was in Beijing, a country of 1.4 billion people, we have
315 or so million people in America, that this country because
of our system, unless we do something to stop it, this
entrepreneurial free spirit that we have produced more goods
and services. One-fourth of the people produced more goods and
services than a country with four times as many people, which
shows you how productive it is when you turn and allow that
entrepreneurial spirit to flourish.
And I want to get on the record one of the reasons I think
that this is going on. The General Counsel for the NLRB is a
gentleman, Mr. Richard Griffin, who was a recess appointment to
the National Labor Relations Board, and his term expired. The
way he got to be general counsel, and I want to make sure this
is in the record, in return for voting for cloture on the
President's nomination to the NLRB and Consumer Financial
Protection Bureau, Senate Democrats agreed not to change the
Senate filibuster rules to lower the maximum threshold required
to approve executive nominees from 60 to 51. That is how he got
there. It was a political deal, and this deal, now we are
dealing with it.
We should not be wasting our time on this in this committee
hearing. We should be spending our time on how to, as Mr.
Holmes said, to lower regulations. Just to give you an example,
and it pains me to say this, that I have a friend at Vanderbilt
University, having two degrees from UT, but he's the chancellor
there. He is a friend, Nick Zeppos. Dr. Zeppos analyzed the
reporting requirements that he has to do at Vanderbilt
University, and this was just not there. Just those
requirements added $11,000 for every student's tuition.
It is ridiculous that we are doing that. Instead of making
it more expensive to go to school, we should be making it less
expensive. Instead of making it harder to start a business and
run it like you are, we should be looking at ways to make it
easier as Mr. Byrne just clearly said.
I have no further comments. Mr. Byrne, do you have any
closing remarks you would like to make or questions you would
like to ask.
Mr. Byrne. I would just like to thank the panel. I think
that you very, very ably clarified and sharpened the
understanding of this issue, and help created the record that
we can use going forward. And to pledge to each one of you and
to the people that I represent down here in the 1st
Congressional District, I am going to do everything I can to
make sure that we preserve what has been a system that has
worked so well, and is not only producing wonderful small
businessmen as you see here, but it is producing jobs for
individual people that work for you, and creates local people,
local businesses that are part of our community, and do so many
good things.
So I am going to continue to work with the chairman here
and with other people on the staff of the committee to see what
we can do try to push back against this. And I yield back, Mr.
Chairman.
Chairman Roe. I thank the gentleman for yielding, and I
want to, again, take the time to thank the witnesses for taking
your time and effort to do this, to come in front of us, and
make this part of the congressional record. I want to thank our
staff who came down early, and the University of South Alabama.
I appreciate all the hospitality you all showed, and certainly
our security folks who are here today, thank you for being
here.
You now, it is a privilege to live in this great country,
and we would not be able to live in this country if it were not
for veterans like Colonel Carey that put his family on hold
many times. He said he dragged his wife halfway around the
world for 15 years to maintain that.
This country did not become great by more and more
regulations. This country became great because of the freedom
that we have to operate in this great system, and it has made
it possible because of Colonel Carey and other veterans have
done. And I want to thank you personally for your service.
Also, what has been the backbone of America has been small
business. We know that most of the jobs are created in this
country by small business people, and they take great pride in
it. And I can tell you as a small business person, the single
most important thing in my business were the people that worked
with me, not for me. They worked with me. And I had many people
that worked with me for almost 40 years, loyal employees that
got up every day and came to work and gave their best effort.
And that is what has helped make this country great. You
see it. I talked to some of the police officers that were here.
They take great pride in what they do, and that has been public
service. Other Americans do that, and I know Mr. Byrne does.
And thank you all here in south Alabama for sending Bradley
Byrne to the U.S. Congress. I mean, a breath of fresh air, and
he has certainly been terrific to work with on this committee.
Look, I am a doctor, and usually when I see lawyers, you
know, my blood pressure goes up and all that.
[Laughter.]
Chairman Roe. But he has brought an expertise to our
subcommittee and to our full committee that was very much
needed. And I want to thank the people of South Alabama for
sending such a skilled citizen servant to the U.S. Congress.
And with that, I thank you once again for being here. No
further business, the meeting is adjourned.
[Whereupon, at 11:12 a.m., the Subcommittee was adjourned.]
[all]