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EXPANDING JOINT EMPLOYER STATUS: 

WHAT DOES IT MEAN FOR WORKERS 

AND JOB CREATORS? 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH, 

EMPLOYMENT, LABOR, AND PENSIONS 

COMMITTEE ON EDUCATION 

AND THE WORKFORCE 

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

HEARING HELD IN WASHINGTON, DC, September 9, 2014 

Serial No. 113–65 

Printed for the use of the Committee on Education and the Workforce 

( 

Available via the World Wide Web: 

www.gpo.gov/fdsys/browse/committee.action?chamber=house&committee=education 

or 

Committee address: http://edworkforce.house.gov 

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(II) 

COMMITTEE ON EDUCATION AND THE WORKFORCE 

JOHN KLINE, Minnesota, Chairman 

Thomas E. Petri, Wisconsin 

Howard P. ‘‘Buck’’ McKeon, California 

Joe Wilson, South Carolina 

Virginia Foxx, North Carolina 

Tom Price, Georgia 

Kenny Marchant, Texas 

Duncan Hunter, California 

David P. Roe, Tennessee 

Glenn Thompson, Pennsylvania 

Tim Walberg, Michigan 

Matt Salmon, Arizona 

Brett Guthrie, Kentucky 

Scott DesJarlais, Tennessee 

Todd Rokita, Indiana 

Larry Bucshon, Indiana 

Lou Barletta, Pennsylvania 

Joseph J. Heck, Nevada 

Mike Kelly, Pennsylvania 

Susan W. Brooks, Indiana 

Richard Hudson, North Carolina 

Luke Messer, Indiana 

Bradley Byrne, Alabama 

George Miller, California, 

Senior Democratic Member 

Robert C. ‘‘Bobby’’ Scott, Virginia 

Rube ́n Hinojosa, Texas 

Carolyn McCarthy, New York 

John F. Tierney, Massachusetts 

Rush Holt, New Jersey 

Susan A. Davis, California 

Rau ́l M. Grijalva, Arizona 

Timothy H. Bishop, New York 

David Loebsack, Iowa 

Joe Courtney, Connecticut 

Marcia L. Fudge, Ohio 

Jared Polis, Colorado 

Gregorio Kilili Camacho Sablan, 

Northern Mariana Islands 

Frederica S. Wilson, Florida 

Suzanne Bonamici, Oregon 

Mark Pocan, Wisconsin 

Mark Takano, California 

Juliane Sullivan, Staff Director 

Megan O’Reilly, Minority Staff Director 

SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR, AND PENSIONS 

DAVID P. ROE, Tennessee, Chairman 

Joe Wilson, South Carolina 

Tom Price, Georgia 

Kenny Marchant, Texas 

Matt Salmon, Arizona 

Brett Guthrie, Kentucky 

Scott DesJarlais, Tennessee 

Larry Bucshon, Indiana 

Lou Barletta, Pennsylvania 

Joseph J. Heck, Nevada 

Mike Kelly, Pennsylvania 

Susan W. Brooks, Indiana 

Luke Messer, Indiana 

Bradley Byrne, Alabama 

John F. Tierney, Massachusetts, 

Ranking Member 

Rush Holt, New Jersey 

Mark Pocan, Wisconsin 

Robert C. ‘‘Bobby’’ Scott, Virginia 

Rube ́n Hinojosa, Texas 

David Loebsack, Iowa 

Joe Courtney, Connecticut 

Jared Polis, Colorado 

Gregorio Kilili Camacho Sablan, 

Northern Mariana Islands 

Frederica S. Wilson, Florida 

Suzanne Bonamici, Oregon 

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(III) 

C O N T E N T S 

Page 

Hearing held on September 9, 2014 ....................................................................... 1 

Statement of Members: 

Roe, Hon. David P., Chairman, Subcommittee on Health, Employment, 

Labor, and Pensions ..................................................................................... 1 

Prepared statement of ............................................................................... 3 

Pocan, Hon. Mark, a Representative in Congress from the State of Wisconsin ............................................................................................................. 4 

Prepared statement of ............................................................................... 6 

Statement of Witnesses: 

Monson, Catherine, Chief Executive Officer, Fastsigns International, Inc., 

Carrollton, TX ............................................................................................... 8 

Prepared statement of ............................................................................... 11 

Ehlers, Clint, Owner, Fastsigns of Lancaster and Willow Grove, Lancaster and Willow Grove, PA ....................................................................... 16 

Prepared statement of ............................................................................... 18 

Panwala, Jagruti, Owner, Multiple Hotel Franchises, Bensalem, PA ......... 24 

Prepared statement of ............................................................................... 26 

Freeman, Harris, Professor of Legal Research and Writing, Western New 

England University School of Law, Springfield, MA ................................. 30 

Prepared statement of ............................................................................... 33 

Duffield, Todd, Shareholder, Ogletree, Deakins, Nash, Smoak and Stewart, P.C., Atlanta, GA ................................................................................... 40 

Prepared statement of ............................................................................... 42 

Additional Submissions: 

Chairman Roe: 

American Hotel and Lodging Association, prepared statement of ........ 71 

Coalition for a Democratic Workplace, letter, dated Sept. 9, 2014 ....... 74 

International Franchise Association, letter, dated Sept. 9, 2014 .......... 75 

National Restaurant Association, letter, dated Sept. 8, 2014 ............... 77 

Chamber of Commerce of the United States of America, letter, dated 

Sept. 23, 2014 ......................................................................................... 79 

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CEWDOCROOM with DISTILLER

(1) 

EXPANDING JOINT EMPLOYER STATUS: WHAT 

DOES 

IT MEAN FOR WORKERS AND JOB 

CREATORS? 

Tuesday, September 9, 2014 

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 10:01 a.m., in Room 

2175, Rayburn House Office Building, Hon. David P. Roe [Chairman of the Subcommittee] presiding. 

Present: Representatives Roe, Wilson, Price, Salmon, Guthrie, 

Heck, Kelly, Brooks, Byrne, Pocan, Scott, Hinojosa, Courtney, Polis, 

Wilson, and Bonamici. 

Staff present: Ed Gilroy, Director of Workforce Policy; Marvin 

Kaplan, Workforce Policy Counsel; Nancy Locke, Chief Clerk; 

James Martin, Professional Staff Member; Zachary McHenry, Legislative Assistant; Brian Newell, Communications Director; 

Krisann Pearce, General Counsel; Lauren Reddington, Deputy 

Press Secretary; Molly McLaughlin Salmi, Deputy Director of 

Workforce Policy; Alissa Strawcutter, Deputy Clerk; Alexa Turner, 

Legislative Assistant; Tylease Alli, Minority Clerk/Intern and Fellow Coordinator; Melissa Greenberg, Minority Labor Policy Associate; Eunice Ikene, Minority Labor Policy Associate; Brian Kennedy, Minority General Counsel; Leticia Mederos, Minority Director of Labor Policy; Megan O’Reilly, Minority Staff Director; and 

Mark Zuckerman, Minority Senior Economic Advisor. 

Chairman ROE. A quorum being present, the Subcommittee on 

Health, Employment, Labor and Pensions will come to order. 

Good morning. Let me begin by welcoming our guests and thanking our witnesses for joining us. We appreciate you sharing your 

thoughts on a complicated and very important issue. 

Each day, more than eight million Americans go to work at our 

nation’s 757,000 franchisees businesses. The franchise model has 

encouraged entrepreneurship, the growth of small businesses, and 

job creation. Countless men and women invest their tears, sweat, 

and savings to realize the dream of owning their own business, and 

the franchise model has helped turn those dreams into a reality. 

CEWDOCROOM with DISTILLER

2 

For most franchise employers, it is tough staying afloat even in 

the best of times. It is especially challenging when Washington bureaucrats change the rules in the middle of the game. In recent 

months, it has become clear the Obama National Labor Relations 

Board is determined to rewrite a franchise model that has worked 

and served workers, employers, and consumers well for decades. 

At the center of this effort is Richard Griffin. As the agency’s 

general counsel, Mr. Griffin has encouraged the board to blur the 

lines of responsibility between franchisor and franchisee. Most recently, he determined McDonalds, Inc., is a joint employer with its 

franchisees, a decision that no doubt sent shockwaves across the 

country. This radical effort is detached from reality for two important reasons. 

First, it pretends the franchise business model doesn’t exist. 

Since 1984, the NLRB has applied a straightforward test to determine whether two separate entities are joint employers of a business establishment. The board analyzes whether the alleged employers share control over essential conditions of employment, such 

as hiring, firing, discipline, supervision, and direction of employees. 

Control over these matters must be direct and immediate. 

The current standard makes perfect sense when one considers 

how the franchise model works in the real world. As a chief executive officer of CKE Restaurants—a company that includes iconic 

brands like Hardee’s and Carl’s Jr.—Andrew Puzder is no stranger 

to the franchise business or this Subcommittee. 

Here is how he has described the franchise business model: ‘‘The 

franchiser/franchisee relationship is built on a division of roles and 

responsibilities. The franchiser owns a unique system, which it licenses and protects as a brand. The franchisee operates an independent business under the brand’s trademarks at one or more locations as a licensee. Franchisees independently choose who they 

hire, the number of people they hire, the wages and benefits they 

pay, the training that such employees undergo, the labor practices 

they use, how their employees are monitored and evaluated, and 

the circumstances under which they are promoted, disciplined, or 

fired.’’ 

Make no mistake, the current standard reflects the way franchise 

businesses have been owned and operated for decades. So why the 

sudden effort to dismantle policies that work? 

As the Wall Street Journal noted in reaction to Mr. Griffin’s decision, ‘‘This is a bonanza for trial lawyers who will be able to shake 

down the parent company for alleged labor violations at franchisees 

whose pockets aren’t as deep. The other beneficiary is Big Labor. 

Under Mr. Griffin’s law, they can leap-frog their direct managers 

to corporate headquarters, which are more vulnerable to the political pressure and less sensitive to local markets.’’ 

Which leads to the second reason why this radical effort is so detached from reality: It fails to recognize the difficult challenges facing workers in the Obama economy. Our nation remains mired in 

a jobs crisis. Workers are frustrated. After six years of President 

Obama’s failed policies, I am frustrated, too. 

Let me—I just held a hearing, in Indiana, Greenfield, Indiana, 

last week, and it struck me when I read the briefing memo that 

in 2009, 159 million people in this country—that is about 60 perCEWDOCROOM with DISTILLER

3 

cent of us—got our health insurance through our business. Today, 

after five years of recovery, 150 million people get their insurance. 

We have lost—9 million people have lost their health insurance 

during a ‘‘recovery.’’ I found that astonishing, that number. And 

that is the Pew Family Research. It is not me making that up. 

Stocks prices on Wall Street are breaking new records while the 

wages on Main Street remain flat. Meanwhile, the prices for essential goods and services like food, gas, and health insurance have 

gone up. 

That is not right, and working families deserve better. Yet today 

we are discussing an effort that will force small businesses to close 

their doors, or at the very least discourage new small businesses 

from being created. Workers will once again be on the losing end 

of this Big Labor bailout at a time they can least afford it. 

I suspect some of my colleagues will protest today’s hearing. It 

will likely be noted the board hasn’t rendered a decision and suggest the Committee is once again putting the cart before the horse. 

We have heard our colleagues sing this tune before, and each time 

it has been followed by a radical shift in board policy. 

The American people deserve to know what the federal government is up to and how it will affect their families. Hiding the truth 

behind some process nonsense isn’t fair to the men and women who 

will have to live by the rules issued by this federal agency. Today’s 

hearing will help shine a light on those consequences and I hope 

will encourage the NLRB to change course. 

With that, I will now recognize my colleague, Congressman Mark 

Pocan, for his opening remarks. 

[The statement of Chairman Roe follows:] 

Prepared Statement of Hon. Phil Roe, Chairman, Subcommittee on Health, 

Employment, Labor, and Pensions 

Each day more than eight million Americans go to work at our nation’s 757,000 

franchise businesses. The franchise model has encouraged entrepreneurship, the 

growth of small businesses, and job creation. Countless men and women invest their 

tears, sweat, and savings to realize the dream of owning their own business, and 

the franchise model has helped turn those dreams into a reality. 

For most franchise employers, it’s tough staying afloat in even the best of times. 

It’s especially challenging when Washington bureaucrats change the rules in the 

middle of the game. In recent months, it’s become clear the Obama National Labor 

Relations Board is determined to rewrite a franchise model that has served workers, 

employers, and consumers well for decades. 

At the center of this effort is Richard Griffin. As the agency’s general counsel, Mr. 

Griffin has encouraged the board to blur the lines of responsibility between the 

franchisor and franchisee. Most recently, he determined McDonalds Inc. is a joint 

employer with its franchisees, a decision that no doubt sent a shockwave across the 

country. This radical effort is detached from reality for two important reasons. 

First, it pretends the franchise business model doesn’t exist. Since 1984, the 

NLRB has applied a straight-forward test to determine whether two separate entities are joint employers of a business establishment. The board analyzes whether 

the alleged employers share control over essential conditions of employment, such 

as hiring, firing, discipline, supervision, and direction of employees. Control over 

these matters must be direct and immediate. 

The current standard makes perfect sense when one considers how the franchise 

model works in the real world. As chief executive officer of CKE Restaurants – a 

company that includes iconic brands like Hardee’s and Carl’s Jr. – Andrew Puzder 

is no stranger to the franchise business or this subcommittee. Here is how he has 

described the franchise business model: 

The franchiser/franchisee relationship is built on a division of roles and responsibilities. The franchiser owns a unique system, which it licenses and protects as 

a brand. The franchisee operates an independent business under the brand’s tradeCEWDOCROOM with DISTILLER

4 

marks at one or more locations as a licensee. Franchisees independently choose who 

they hire, the number of people they hire, the wages and benefits they pay, the 

training that such employees undergo, the labor practices they use, how their employees are monitored and evaluated, and the circumstances under which they’re 

promoted, disciplined or fired. 

Make no mistake, the current standard reflects the way franchise businesses have 

been owned and operated for decades. So why the sudden effort to dismantle policies 

that work? As the Wall Street Journal noted in reaction to Mr. Griffin’s decision: 

This is a bonanza for trial lawyers who will be able to shake down the parent 

company for alleged labor violations at franchisees whose pockets aren’t as deep. 

The other beneficiary is Big Labor. Under Mr. Griffin’s law, they can leap-frog their 

direct managers to corporate headquarters, which are more vulnerable to political 

pressure and less sensitive to local markets. 

Which leads to the second reason why this radical effort is so detached from reality – it fails to recognize the difficult challenges facing workers in the Obama 

economy. Our nation remains mired in a jobs crisis. Workers are frustrated. After 

six years of President Obama’s failed policies, I am frustrated too. Stocks prices on 

Wall Street are breaking new records while wages on Main Street remain flat. 

Meanwhile, the prices for essential goods and services like food, gas, and health insurance have gone up. 

That’s not right and working families deserve better. Yet today we are discussing 

an effort that will force small businesses to close their doors, or at the very least, 

discourage new small businesses from being created. Workers will once again be on 

the losing end of this Big Labor bailout and at a time they can least afford it. 

I suspect some of my colleagues will protest today’s hearing. It will likely be noted 

the board hasn’t rendered a decision and suggested the committee is once again putting the cart before the horse. We’ve heard our colleagues sing that tune before and 

each time it has been followed by a radical shift in board policy. 

The American people deserve to know what the federal government is up to and 

how it will affect their families. Hiding the truth behind some process nonsense isn’t 

fair to the men and women who will have to live by the rules issued by this federal 

agency. Today’s hearing will help shine a light on those consequences and I hope 

encourage the NLRB to change course. 

Mr. POCAN. Great. Well, thank you, Chairman Roe. I want to 

thank the witnesses for their thoughtful testimony today. 

I can’t help but notice this committee has met more than 17 

times over the last three and a half years for markups or hearings 

on the activities of the NLRB. By comparison, this Committee has 

not had a single hearing on raising the minimum wage, equal pay, 

job creation, or how to lower unemployment. 

The focus of this morning’s hearing is the National Labor Relations Board and the joint employer standard. Freedom of association and negotiating for improved working conditions are fundamental rights for all workers in this country, regardless of what 

type of employment they are in. As an owner of a specialty printing 

shop for more than 27 years, I understand the challenges small 

businesses are facing. I also understand the responsibilities 

businessowners have to their employees. 

Splintered employment relations should not be a shield for unscrupulous employers who want to deny workers their fundamental 

rights. Joint employers should not be able to play hot potato with 

their employees’ livelihoods or the livelihoods of their families. 

As we turn the corner on the 17-plus NLRB hearings and markups, it seems that we should move our discussion to something 

more productive and recognize the realities facing today’s workforce. Too many Americans are trapped in precarious, unstable, 

and low-paying jobs with little or no recourse under the law. We 

must do more to address the serious challenges workers face nationwide. 

CEWDOCROOM with DISTILLER

5 

This hearing is another attempt by my friends on the other side 

of the aisle to undermine the reputation of the NLRB and interfere 

with its legitimate authority. At the last NLRB hearing held two 

months ago, we focused on the case of Browning-Ferris Industries. 

The board continues to deliberate over the facts of the Browning 

case. The Board has called for briefs as it reviews the joint employer standard. This is completely within its jurisdiction, and this 

hearing is not the appropriate place to try and adjudicate any 

board decision currently under consideration. 

A review of the joint employer standard is timely, given the disturbing trends we are seeing in today’s labor market. More and 

more, businesses are relying on temporary and contingent workers, 

franchisees, and other nontraditional forms of employment to limit 

their labor costs and exposure to liability. 

While temporary employment is commonly seen as a path to permanent employment, increasingly it is not the case. There are now 

2.87 million workers employed by temp agencies, and these workers fare much worse than others in the private sector. 

Temporary workers make an average of $3.40 an hour less than 

their full-time counterparts. Temp workers have significantly less 

access to employer-provided benefits, with only 8 percent receiving 

health care benefits and only 9 percent receiving pension benefits 

through their jobs. And temporary workers are also more likely to 

go without sick days, paid vacation, and other benefits. 

Perhaps most troubling is temp workers are often given insufficient job safety training. Forty-two percent of temp workers perform light industrial work. These construction and manufacturing 

workers have substantially higher rates of injury and higher onthe-job death rates. This is simply unacceptable. 

Indirect employment relationships are also very common in the 

fast food industry, which almost exclusively uses a franchise model. 

While franchisors claim to have no direct control over the terms 

and conditions of employment, they can prescribe a wide range of 

factors that affect one’s workplace conditions, such as the number 

of workers at a franchise, what hours they work, and their training. 

Some fast food chains, such as McDonald’s, even provide 

franchisees with scheduling software that sets and monitor workers’ schedules, tracks sales data, labor costs, the labor needs of the 

franchise, and reviews wages. In many cases, fast food franchise 

agreements are so extensive that the only variable cost for a 

franchisee is labor. 

In the few weeks we have remaining this session, I hope this 

Committee and this Congress will focus on the incredibly urgent 

priorities of the American people: raising the minimum wage; renewing unemployment insurance for the millions who still need it; 

stopping employment discrimination based on sexual orientation; 

ensuring paycheck fairness for women; and providing relief for the 

tens of millions of students and parents with student loan debt. 

Thank you, Mr. Chairman. I yield back. 

[The statement of Mr. Pocan follows:] 

CEWDOCROOM with DISTILLER

6 

Prepared Statement of Hon. Mark Pocan, a Representative in Congress 

from the State of Wisconsin 

Thank you, Chairman Roe. 

I want to thank the witnesses for their thoughtful testimony. I can’t help but notice this committee has met more than 17 times over the last three and a half years 

for hearings or markups on the activities of the NLRB. By comparison this Committee has not held a single hearing on raising the minimum wage, equal pay, job 

creation or how to continue to lower unemployment. 

The focus of this morning’s hearing is the National Labor Relations Board and 

the ‘‘joint employer’’ standard. 

Freedom of association and negotiating for improved working conditions are fundamental rights for all workers in this country-regardless of what type of employment they are in. 

As an owner of a specialty printing shop for more than 26 years, I understand 

the challenges small businesses are facing. I also understand the responsibilities 

business owners have to their employees. 

Splintered employment relationships should not be a shield for unscrupulous employers who want to deny workers their fundamental rights. Joint-employers should 

not be able to play hot-potato with their employees’ livelihoods, or the livelihoods 

of their families. 

As we turn the corner on 17-plus NLRB hearings and mark-ups, it seems that 

we should move our discussion to something more productive and recognize the realities facing today’s workforce. 

Too many Americans are trapped in precarious, unstable, and low-paying jobs 

with little or no recourse under the law. We must do more to address the serious 

challenges workers nationwide face. 

This hearing is another attempt by my friends on the other side of the aisle to 

undermine the reputation of the NLRB and interfere with its legitimate authority. 

At the last NLRB hearing held two months ago, we focused on the case of Browning-Ferris Industries. The Board continues to deliberate over the facts of the Browning case. The Board has called for briefs as it reviews the joint-employer standard. 

This is completely within its jurisdiction and this hearing is not the appropriate 

place to try and adjudicate any Board decision currently under consideration. 

A review of the joint-employer standard is timely, given the disturbing trends we 

are seeing in today’s labor market. More and more, businesses are relying on temporary and contingent workers, franchisees, and other non-traditional forms of employment to limit their labor costs and exposure to liability. 

While temporary employment is commonly seen as a path to permanent employment, increasingly it is not the case. There are now 2.87 million workers employed 

by temp agencies, and these workers fare much worse than others in the private 

sector: 

* Temp workers make an average of $3.40 an hour less than their full-time counterparts. 

* Temp workers have significantly less access to employer-provided benefits, with 

only 8 percent receiving health care benefits and only 9 percent receiving pension 

benefits through their jobs. 

* Temp workers are also more likely to go without sick days, paid vacation, and 

other benefits. 

Perhaps most troubling is temp workers are often given insufficient job safety 

training. Forty-two percent of temp workers perform light industrial work. These 

construction and manufacturing workers have substantially higher rates of injury 

and higher on-the-job death rates. This is simply unacceptable. 

Indirect employment relationships are also very common in the fast food industry, 

which almost exclusively uses a franchise model. 

While franchisors claim to have no direct control over the terms and conditions 

of employment, they can prescribe a wide range of factors that affect one’s workplace conditions, such as the number of workers at a franchise, what hours they 

work, and their training. 

Some fast food chains, such as McDonald’s, even provide franchisees with scheduling software that sets and monitor workers’ schedules, tracks sales data, labor 

costs, the labor needs of the franchise, and reviews wages. 

In many cases, fast food franchise agreements are so extensive that the only variable cost for a franchisee is labor. 

In the few weeks we have remaining this session, I hope this Committee and this 

Congress will focus on the incredibly urgent priorities of the American people-raising the minimum wage, renewing unemployment insurance for the millions who still 

need it, stopping employment discrimination based on sexual-identity, ensuring payCEWDOCROOM with DISTILLER

7 

check fairness for women, and providing relief for the tens of millions of students 

and parents with student loan debt. 

Thank you. I yield back. 

Chairman ROE. I thank the gentleman for yielding. 

Pursuant to committee rule 7(c), all 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 such statements and other extraneous material referenced during the hearing to be submitted for 

the official hearing record. 

It is now my pleasure to introduce our distinguished panel of witnesses. Our first witness, Ms. Catherine Monson, is the chief executive officer of FASTSIGNS International, headquartered in 

Carrollton, Texas. With more than 30 years of franchising and digital printing experience, Ms. Monson was named CEO of the International Signage and Graphic and Visual Communications Franchise Company in December of 2008. 

Welcome. 

Mr. Clint Ehlers is the owner of two FASTSIGNS franchises located in Lancaster and Willow Grove, Pennsylvania. Previously, he 

owned FASTSIGNS franchise in Culver City, California. 

And welcome, Mr. Ehlers. 

Our next witness is Mrs. Jagruti Panwala, Bensalem, Pennsylvania, is the owner of multiple hotel franchises. Mrs. Panwala has 

spent many years in various positions within the hospitality industry from administration to owner-operator. 

Welcome. 

Mr. Harris Freeman is a professor of legal research and writing 

at Western New England University School of Law in Springfield, 

Massachusetts. Professor Freeman’s professional experience includes working in the private sector litigating employment, civil 

rights, and personal injury claims. In 2009, he was appointed to 

the Commonwealth Employment Relations Board, an appellate 

agency body that oversees public-sector labor relations in Massachusetts. 

Welcome, Mr. Freeman. And from an obstetrician, a personal injury lawyer makes my palms sweat. So— 

[Laughter.] 

Mr. Todd Duffield is a shareholder with Ogletree, Deakins, Nash, 

Smoak & Stewart, PC. Mr. Duffield’s practice includes union organizing campaigns and elections, unit clarifications, collective bargaining negotiations, grievance arbitration, and contract administration under the National Labor Relations Act and the Railway 

Labor Act. 

Before I recognize you to provide your testimony, let me briefly 

explain our lighting system. You have five minutes to present your 

testimony. When you began, the light in front of you will turn 

green. When one minute is left, the light will turn yellow. When 

your time is expired, the light will turn red. 

At that point, I will ask you to wrap up your remarks as best 

you are able. And I am not going to cut you off in the middle, but 

go ahead and wrap up. And after everyone has testified, members 

will each have five minutes for questions. 

CEWDOCROOM with DISTILLER

8 

And with that, I will begin with Ms. Monson. You are recognized 

for five minutes. 

STATEMENT OF MS. CATHERINE MONSON, CHIEF EXECUTIVE 

OFFICER, FASTSIGNS INTERNATIONAL, INC., CARROLLTON, 

TX (TESTIFYING ON BEHALF OF THE INTERNATIONAL FRANCHISE ASSOCIATION) 

Ms. MONSON. Thank you very much, Chairman Roe, Mr. Ranking 

Member, and distinguished members of the subcommittee. My 

name is Catherine Monson, and I am CEO of FASTSIGNS International. And I am here today both as the CEO of this franchisor 

and also as a member of the board of directors of the International 

Franchise Association. 

With over 30 years in franchising, I have been very active in the 

International Franchise Association for over 20 years on many committees, board membership for six years, and a frequent speaker at 

their events. The International Franchise Association is the oldest 

and largest trade association devoted to representing the interests 

of franchising. Its membership includes franchisors, franchisees, 

and suppliers. 

Its mission is to protect, enhance, and promote franchising, and 

we do that through government relations, public relations, and educational programs. IFA membership spans 300 different industries, 

more than 11,000 franchisee members, 1,100 franchisor members, 

and 575 supplier members. 

Far too often, franchising is confused as being fast food and hotels. In fact, many more business lines are involved in franchising 

than fast food and hotels, including accounting and tax services, 

automotive aftermarket, batteries, business services, campgrounds, 

childcare, clothing, retail, shoe stores, fitness and gyms, hair salons, hair cutting, handyman services, home improvement services, 

home inspection, lawncare. It goes on and on and on. 

The reason fast food is so visible is everybody eats three meals 

every single day. Signage not so visible, because only people who 

need signage buy it, and they only buy it five to seven times a year. 

And that is why franchising is often seen as fast food. 

I am absolutely passionate about franchising. I have seen franchising allow people to achieve the American Dream of business 

ownership. I have seen franchisees, like my franchisee here, Clint 

Ehlers, create jobs for employees, promote them, give them training 

and opportunities, provide a valuable service in the local marketplace, and through all that, build wealth for his family, save for his 

kids’ college education, et cetera. 

Franchising is a large community of diverse businesses, all that 

operate under a franchise model that is based on the franchisor, 

creating a brand operating systems, standards, et cetera, selecting 

great franchisees who then own, operate, and manage the businesses. We often say in franchising that the franchisee is in business for himself, but not by himself. He benefits from the brand, 

the training, the supply chain, the resources, the benefits of talking 

with other franchise owners, et cetera. But it is the franchisee who 

owns the business, runs the business, hires the employees, manages and motivates the employees, has his own employer identification number, and pays the taxes. 

CEWDOCROOM with DISTILLER

9 

Successful franchisees determine the profitability in their own 

enterprise by how well they implement the business plan, the business model, and how well they motivate and manage their employees. It is the franchisee that creates the jobs and trains its employees. The employees work for the franchisee and not the franchisor 

brand. 

The franchisee handles all areas of supervision, scheduling, discipline, promotion, wage changes, et cetera. The franchisor, 

FASTSIGNS International, has no input on the franchisee’s labor 

relations. Franchising is an outstanding American success story, 

creating jobs and economic growth. Last year, in 2013, there were 

759,000 franchise establishments in the United States employing 

over 8,327,000 employees, generating $803 billion of economic output. 

The 2014 estimate is that franchise jobs will increase 2.6 percent—in other words, franchise establishments are going to generate 221,000 new jobs this year, and what we need now in the 

United States is more jobs. Many American franchise businesses 

have become world-renown brands and are a substantial asset in 

the trade balance of the United States, all without exporting a single job. Franchising truly is a great American success story. 

The franchisor/franchisee relationship is built on a division of 

roles and responsibilities. The franchisor, like myself, creates the 

brand, the training, the tools, but then constantly improves it and 

refines it with the best practices we learn from our franchisees. 

The franchisee operates the independent business and manages 

every single one of the day-to-day operations. 

As you are all aware, on July 29, the NLRB’s general counsel announced he has authorized complaints against numerous McDonald’s franchisees and McDonald’s corporate as joint employers for 

alleged unfair labor practices. This marks a drastic change in the 

franchisee/franchisor relationship and a drastic change in law, as 

it has been understood. 

Under the current standard, only legally separate entities that 

exert a significant degree of control over employees are considered 

joint employers. Under this new standpoint, it will completely 

change and I think destroy the franchise model. Typically franchise 

agreements are 20 years in term. Our average length remaining in 

FASTSIGNS is 11–1/2 years. And these contracts were negotiated 

while relying on the current, existing NLRB joint employer standard. 

What the GC is attempting to do by enacting a new standard of 

who is and who is not an employer amounts to an impairment of 

contracts, and we and many, many others freely entered into these 

long-term contracts. The GC is essentially becoming an arbiter for 

those contracts by telling the parties, ‘‘Surprise!’’ That is not what 

our legal system is about. Our legal system stands for certainty, so 

businesses and business people can make informed decisions. 

If the NLRB’s new proposed joint employer standard becomes the 

law of the land, it will be tantamount to re-writing hundreds of 

thousands of contractual relationships by government fiat in ways 

the parties never contemplated to their mutual disadvantage. 

As I look at my franchise— 

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Chairman ROE. Ms. Monson, could you go ahead and wrap up, 

please? 

Ms. MONSON. As I look at my franchise business, if I think what 

I would have to do to protect myself if this new joint employer decision becomes law, I am going to have to quadruple, quintuple my 

workforce to be controlling and checking and auditing my 

franchisees. I am going to be demotivating my franchisees. I am 

going to be laying extra cost onto them. I am going to be taking 

on extra risk, possibly extra legal bills and lawsuits. It could be the 

demise of my organization and, thus, the 489 franchisees of 

FASTSIGNS in the U.S. may no longer have a brand to fly their 

flag under. 

Thank you very much, Mr. Chairman and committee members, 

for allowing me to give my testimony. 

[The statement of Ms. Monson follows:] 

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Chairman ROE. Thank you. 

Mr. Ehlers, you are recognized for five minutes. 

STATEMENT OF MR. CLINT EHLERS, OWNER, FASTSIGNS OF 

LANCASTER AND WILLOW GROVE, LANCASTER AND WILLOW 

GROVE, PA (TESTIFYING ON BEHALF OF THE INTERNATIONAL FRANCHISE ASSOCIATION) 

Mr. EHLERS. Chairman Roe, Mr. Ranking Member, and members 

of the committee, thank you for inviting me to testify today on the 

impact that an altered joint employer standard will have on franchise businesses such as mine. 

My name is Clint Ehlers, and I am the owner and operator of 

two FASTSIGNS locations—one in Lancaster and one in Willow 

Grove, both in Pennsylvania. I am testifying today on behalf of the 

International Franchise Association. 

The recent announcement by the National Labor Relations Board 

Division of Advice that it would allow labor complaints to proceed 

against McDonald’s Corporation, as well as against its franchisees, 

worries me a great deal. My concern is that my franchisor, in response to the NLRB’s changes to longstanding joint employer 

standards, will take measures to protect itself that will end up reducing my autonomy as a franchise owner. 

In 2006, I left a 17-year career in advertising and strategic marketing to fulfill my dream of becoming an entrepreneur and smallbusiness owner. I spent many months researching different types 

of businesses and industries, both independently-owned and franchised. I decided to invest in FASTSIGNS. Not only was 

FASTSIGNS the leader in the sign and graphics industry, but it 

also had an excellent team of dedicated professionals with one goal 

in mind: to help me be as successful as I wanted to be. 

Owning my own business lets me be the steward of my resources 

and impact the lives of my employees, as well as the members of 

the communities in which we operate. In 2007, I opened my first 

FASTSIGNS in Culver City, California, which we quickly grew into 

one of the top centers in the nation. I sold that center in 2012, October of 2012, and I moved my family to Pennsylvania, where we 

purchased FASTSIGNS of Willow Grove in 2013 and FASTSIGNS 

of Lancaster earlier this year. We currently have 14 full-time employees and two part-time employees, and I am hoping to expand 

my operations in the coming years. 

In order to understand the impact of the NLRB’s announcement, 

it is essential to understand the fundamental difference in the roles 

of franchisees and franchisors. The franchisor enforces brand 

standards that maintain the quality of the products and services, 

but it is the franchisee that manages the day-to-day operations of 

the business, including the hiring and the firing, wages, benefits, 

work schedules, and working conditions. Examples of the support 

that franchisors provide include assistance in site selection, sales 

and cost benchmarking, and purchasing power with various suppliers. Most importantly, they help me to monitor my product quality. 

I agree that this type of support is necessary for the collective 

good of the system and it benefits each franchise that operates 

under the FASTSIGNS brand. The role of daily management of a 

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franchise location, however, falls to me and decisions regarding 

those operations are mine alone. It is my decision to pay my hourly 

employees a fair wage, and I pick the health insurance plan that 

I offer my workers. 

I recently had an employee who was struggled to manage 

childcare over the summer for his 12-year-old son, while he was 

working full-time at one of our stores. We were able to rework his 

scheduled hours on some days to accommodate summer camp, and 

on other days, we decided that he could bring his son to work. In 

fact, we later hired his son for a summer job doing various things 

like sweeping, cleaning, and taking the trash out. 

This is the type of action that only an independent small-business owner can take to address this issue. If a large corporation 

were presented with a similar workforce management challenge, it 

would most likely consult its human resource teams to determine 

the policies of the company. 

To the casual observer, the NLRB’s decision could appear to be 

a good thing for a franchise owner like me, that if I screw up, my 

franchisor will be there to save me. Not only is this incorrect, but 

it reflects a fundamental misunderstanding of a franchise owner’s 

motivations for starting a franchise business. 

In almost every other aspect of my business, I am considered an 

independent owner. I have my own accountants, and I file my own 

taxes. I assume the financial risk when I start a business, and I 

take out loans for working capital. Similarly, if I were to get into 

any legal trouble, I would need to hire my own counsel. 

I bought a franchise so that I could run my own business, not 

so that I could be a part of someone else’s. I take pride in my successes, and I hold myself accountable for my failures. I work diligently to build lasting relationships with customers and integrate 

my business into the local community. The real impact of a new 

standard that considers my franchisor the joint employer of my 

workers is that I will have less independence and less control over 

the business that I have worked so hard to build. 

If franchises are not independent, entrepreneurs will not seek to 

open new franchise locations at a time when our economy is thirsty 

for growth and expansion. Franchise small-business owners operate 

on almost every Main Street in America. My motivations are simple, and my intentions are sincere. I hope to succeed for my family, 

my employees, and my community. 

I cannot imagine what I would do if I were stripped of my independence because another franchise owner hundreds of miles away 

is facing a lawsuit that has nothing to do with me. If the NLRB’s 

recent joint employer determination is upheld, franchise owners everywhere would lose their autonomy. 

The purpose of this proposal seems not to be to increase the accountability of those most responsible for employment decisions, 

but rather to find deeper pockets to pay higher damages from potential lawsuits. That is wrong and should not be allowed. 

I thank you for inviting me to testify today, and I look forward 

to answering any questions that you have. 

[The statement of Mr. Ehlers follows:] 

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Chairman ROE. Thank you, 

Mrs. Panwala, you are recognized for five minutes. 

STATEMENT OF MRS. JAGRUTI PANWALA, OWNER, MULTIPLE 

HOTEL FRANCHISES, BENSALEM, PA (TESTIFYING ON BEHALF OF THE ASIAN AMERICAN HOTEL OWNERS ASSOCIATION) 

Mrs. PANWALA. Thank you. 

Chairman Roe, Ranking Member Tierney, and distinguished 

members of the subcommittee, thank you for the opportunity to testify before you today. 

My name is Jagruti Panwala. My family and I are owners and 

operators of five hotels in the northeastern United States. And we 

employ over 200 people. I am also a first-generation American, an 

entrepreneur, and franchisee. I come before you today to discuss a 

significant threat to my livelihood and the livelihood of those I employ, many of whom I consider to be my family. 

When I was only 22 years old, my husband and I bought our first 

Economy Inn, an independent motel with 35 operational rooms, in 

Levittown, Pennsylvania. We borrowed money from family and 

friends to make the down payment and secured a loan to get started. 

In addition to working at the motel for more than 100 hours a 

week, I was also living at the hotel with my husband in room 201. 

Not only was I an owner and operator, but I was also a desk clerk, 

housekeeper, plumber, security guard, handyman, landscaper, and 

janitor. 

Even after all of our efforts to build our business, it was still difficult to make ends meet, particularly in that market. In order to 

succeed as hoteliers, we realized it was not enough simply to run 

the operation efficiently, but we need to attract more customers. 

We found that we could do so by affiliating with a nationally recognized brand. 

After Choice Hotels accepted our franchise application, we converted our Economy Inn into the Comfort Inn hotel. This was our 

first experience with franchising, or raising a flag of a national 

brand, as it is known in the industry. 

Ultimately, franchising appealed to us because we still controlled 

our own business and simply paid fees for the use of a brand name. 

Since that time, I have worked with four different franchisors. 

In addition to running my own family business, I also serve as 

a board member of the Asian American Hotel Owners Association, 

which is AAHOA. AAHOA members own over 40 percent of all hotels in the United States and employ over 600,000 workers, accounting for nearly $10 billion in payroll annually. Approximately 

80 percent of the more than 20,000 properties AAHOA members 

own are franchised businesses. My story is nearly identical to those 

of nearly 13,000 members of this great association. 

I am here today to explain my perspective as a franchisee and 

describe how an expanded definition of a joint employer status will 

have a devastating effect on my businesses, my employees, and the 

lodging industry. 

The franchising model for hotels is straightforward. As a hotelier, 

it is my responsibility to identify the market, secure the financing, 

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purchase the land, establish contracts, set prices, determine staffing needs, and run the daily operations of my business. 

Conversely, hotel franchisors’ responsibilities include providing 

construction guidelines, conducting marketing campaigns, developing training for management, and generally offering guidance to 

ensure the quality of their brand remains consistent from one hotel 

to the next. 

In my role as a hotel operator, I determine the working environment. I assess the overall staffing needs for each property and 

make hiring decisions accordingly. I also set wages, benefits, hours, 

promotions, raises, and disciplinary procedures. 

Mr. Chairman, it is for these reasons I am extremely alarmed by 

the radical decision of the NLRB general counsel to create joint employer status for franchisors. Assigning liability for employment decisions to the franchisor may cause franchisors to impose control 

over daily operations of each business in an effort to mitigate 

against claims. Especially, I would no longer be in business for myself. 

Instead of acting as a licensor and providing guidance from timeto-time, the franchisor would likely feel the need to become a partner and try to have influence on my business and staffing decisions. In an effort to protect against liability, franchisors would 

likely have to take an active role in basic employment decisions 

like hiring, firing, wages, hours, and benefits. The franchisors may 

also try to dictate policies for promotions, raises, and advancement 

within my own company. 

It is important to remember that most franchisors are public 

companies with different goals and morals than I have as a smallbusiness owner. If this were to happen, I would essentially become 

the employee of a parent corporation and no longer an entrepreneur. 

To be completely honest, if these were the conditions of the franchising model before I became an hotelier, I would have never entered into this business. 

Mr. Chairman, Ranking Member Tierney, and the members of 

the committee, I sincerely thank you for the opportunity to share 

my story with you, because I have worked too hard and have overcome too many obstacles as an entrepreneur and as a first-generation American to sit by while bureaucrats and lawyers attempt to 

undermine my success and status as an employer and a businessowner. 

I strongly urge this committee and the National Labor Relations 

Board to consider the tremendously adverse impact on franchisees 

and workers when deliberating policy proposals associated with the 

definition of a joint employer. 

Thank you. 

[The statement of Mrs. Panwala follows:] 

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Chairman ROE. Thank you. 

Professor Freeman, you are recognized for five minutes. 

STATEMENT OF MR. HARRIS FREEMAN, PROFESSOR OF 

LEGAL RESEARCH AND WRITING, WESTERN NEW ENGLAND 

UNIVERSITY SCHOOL OF LAW, SPRINGFIELD, MA 

Mr. FREEMAN. I would like to thank Chairman Roe, Congressman Pocan, and the entire subcommittee for this opportunity. 

If I may begin with a little bit of a disclaimer that I hope won’t 

detract from my time, given the chairman’s introduction, I am not 

here today as an administrative law judge who functions in the 

public sector. I am speaking here as a professor and researcher 

who has done extensive work looking at contingent work and precarious employment, including under NLRB law. Nor am I here to 

deal with tortious conduct and personal injury, so rest assured, 

Chairman. 

My testimony addresses the economic realities and legal issues 

relating to joint employer status in workplaces where extensive 

subcontracting of core business functions depends on temporary 

staffing services and franchising. 

The National Labor Relations Board is looking to revive its traditional joint employer test as one means of making fundamental 

labor rights available to workers experiencing the precarious consequences of the profound transformations now occurring in the 

modern workplace. By re-examining its joint employer test, the 

board is fulfilling the responsibility that the Supreme Court has 

entrusted to it, that is, to adapt the Act to changing patterns of industrial life. 

In my lifetime, no change in the workplace has been more upending than the rapid expansion of precarious low-wage work and subcontracting that has irreversibly fissured the 21st century workplace. In this context, temporary staffing and franchising account 

for a disproportionate share of economic growth, following the 

Great Recession of 2008. Last year, staffing services generated 

$109 billion in sales and a full 2 percent of the total jobs in the 

workforce. 

Profits are high in this industry. In the first quarter of this year, 

True Blue, the largest U.S. staffing agency, had quarterly profits 

of $120 million on gross revenues of $453 million. Franchising is 

equally profitable, as evidenced by the fast food sector where, in 

2012, the 10 largest franchises employed over 2.25 million workers 

and earned more than $7.4 billion in profits. 

Unfortunately, soaring profits and substantial job growth in 

temping and franchising has advanced hand-in-glove with povertylevel wages and extraordinarily high rates of wage theft and health 

and safety violations. 

For example, in metro Chicago, temp workers comprise over twothirds of the 150,000 employees in the warehouse sector. They average $9 per hour, $3.48 an hour less than direct hires. Two-thirds 

of these workers exist with income under the poverty line. 

A well-documented national epidemic of wage theft in the staffing industry is only making matters worse. Furthermore, OSHA 

complaints and protests by temp workers unearthed major health 

and safety issues facing these individuals. 

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In franchising, 75 percent of America’s 3.5 million fast food workers are employed in franchise outlets. Numerous studies indicate 

that underemployment, poverty-inducing earnings, and wage theft 

are the norm. Households that include fast food workers are four 

times as likely to live below the federal poverty level. This is a 

failed and unsustainable business model that is subsidized by hardworking taxpayers. It is far different than the franchise model that 

has been discussed here today by the business individuals who are 

here representing their industries. U.S. taxpayers now shell out about $3.8 billion a year to cover 

the cost of public benefits received by fast food workers employed 

at the top 10 franchises, because these workers must rely on government welfare programs to supplement their poverty-level wages. 

These workplace ills are unquestionably subject to improvement, 

and that is why the board in the Browning-Ferris case is now reexamining the joint employer test. That is the case involving a recycling center where all of the workers are temps. 

According to the Supreme Court, the NLRB’s traditional joint 

employment test is designed to determine whether a putative joint 

employer possesses sufficient control over the terms and conditions 

of a workforce to qualify as a joint employer with the actual employer. Absolute control is not the standard. Rather, it recognizes 

that there might be a co-determination of terms and conditions of 

employment by two business entities. 

In temporary staffing arrangements, the user employer, not the 

temp agency, controls the work environment of the temp workforce. 

For this reason, the contracts governing the temping arrangements 

typically cede to the client employer, management, and supervisory 

roles for the temp workers. This gives them a major role in co-determining the work conditions. 

Staffing agencies only control wage payments, payroll, workers 

compensation, and the like. User clients, on the other hand, are 

contractually assigned all other employer responsibilities, including 

the right to remove any temp worker from the workforce. Many 

franchising arrangements are rather similar, in that it is virtually 

impossible to have a meaningful labor agreement without both the 

user client and the franchiser at the bargaining table. 

Tightly controlled top-down franchising, unlike what is discussed 

here today, has expanded so that major franchisors like Burger 

King and other fast food corporations can maintain uniformity of 

brand, product and operations. Under these agreements, the terms 

and conditions of franchisee workers are co-determined by 

franchisors through operating manuals and communications with 

franchisees. 

Sophisticated management systems allow the franchisor to dictate the number of workers required to do the job, the manner and 

pace of work, the supplies on the job, how equipment is used, not 

to mention grooming standards. Every one of these contract provisions is a condition of employment subject to collective bargaining. 

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ing and franchising. The statutory text of the NLRA and well-reasoned precedent plainly allow the board the discretion to craft the 

appropriate unit for collective bargaining purposes, including units 

of more than one employer. 

In fact, the Labor Act’s definition of employer is intentionally 

broad and gives the board wide latitude in determining whether a 

staffing agency is— 

Chairman ROE. Mr. Freeman, if you could wrap up. You are a 

couple minutes over. 

Mr. FREEMAN. I will certainly do that, Mr. Chairman. A return 

to the board’s traditional better-reasoned standard is now necessary to achieve both the flexibility employers seek in their business plans and the fair treatment and decent wages that workers 

are now demanding. 

A failure to do so runs the risk of rendering labor law irrelevant 

in the low-wage economy, obstructing the efficacy of collective bargaining, and increasing the potential for strikes and other forms of 

industrial unrest. It takes little imagination to foresee the potential 

for industrial strife when large concentrations of underemployed 

low-wage temps and franchised fast food workers are unable to 

meaningfully exercise their fundamental right to bargain and form 

unions. 

Thank you for the opportunity to address your subcommittee. 

[The statement of Mr. Freeman follows:] 

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Chairman ROE. Thank you. 

Mr. Duffield, you are recognized for five minutes. 

STATEMENT OF MR. TODD DUFFIELD, SHAREHOLDER, 

OGLETREE, DEAKINS, NASH, SMOAK & STEWART, P.C., ATLANTA, GA 

Mr. DUFFIELD. Thank you. Good morning, Chairman Roe, and 

members of the subcommittee. We have all heard the phrase, ‘‘If 

it ain’t broke, don’t fix it.’’ 

Well, for the past three decades, the board has adhered to the 

same standard for determining if two separate businesses are joint 

employers. The test is clear, it makes sense, and it has worked for 

30 years. The standard provides a bright-line test that everyone— 

employers, employees, unions, the board, and the courts—can all 

apply. 

Under the current standard, two separate entities are treated as 

joint employers if they share or co-determine essential terms and 

conditions of employment. In making this determination, the board 

evaluates whether the putative joint employer meaningfully affects 

matters such as hiring, firing, discipline, supervision, and direction 

of employees, and whether the putative joint employers’ control 

over these matters is direct and immediate. 

By tying joint employer status to direct and immediate control 

over fundamental aspects of the employment relationship, the 

board’s current standard ensures that the joint employer is actually 

involved in or has actual authority over matters within the scope 

of the National Labor Relations Act. 

Now, the general counsel for the NLRB has taken the position 

that the board should abandon the current test and replace it with 

one that focuses on indirect control or potential control, even if that 

control has never been exercised, and focusing on industrial realities that they claim otherwise make the business, or the putative 

joint employer, an essential party to meaningful collective bargaining. 

The general counsel claims that this was the prior standard, but, 

in fact, prior to 1984, the board itself called the standard amorphous and appeals courts routinely could not find clear principles 

underlying the board’s decisions. It was a mess that the board 

wisely cleaned up 30 years ago. 

The general counsel’s proposed standard ignores the common law 

agency principles that Congress directed the board to apply when 

it passed the Taft-Hartley Act in 1947. Instead of focusing on the 

relationship between the employees and their employer, the proposed standard focuses on the business relationship of two separate 

entities or two separate companies. 

The general counsel’s proposed standard also would overturn 

longstanding congressional policies not to enmesh employers in 

each other’s labor disputes. Congress rejected a similar attempt in 

the mid-1970s, when legislation was proposed to amend the Act to 

allow common-situs picketing. 

The proposed standard would virtually eviscerate secondary boycott protections in the Taft-Hartley Act. Section 8(b)(4) of the act 

is designed to protect secondary or neutral employers from being 

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eral counsel proposed standard would blur the concept of neutrality 

and make these protections useless. 

Even more fundamentally for the nation’s economy, the proposed 

standard would destroy or at least create a massive upheaval of established highly successful business models involving franchisors 

and franchisees throughout the country. Large-scale franchisors 

who retain only the control required to protect their brand, trade 

name, and trademark could be drawn into hundreds of collective 

bargaining relationships where they have little or no involvement 

whatsoever with the workplace. 

Additionally, joint employers would be required by Section 8(a)(5) 

to execute bargaining agreements and subject themselves to contractual and unfair labor practice liabilities without having any 

control over the day-to-day operations of myriad locations throughout the country. 

Rather than accept such liabilities, many companies undoubtedly 

will opt to cancel these arrangements, thus displacing small businesses and the millions of jobs that they create. As the California 

Supreme Court recently stated, to use control of business matters 

to infer control of personnel matters would stand the franchise relationship on its head. 

But it is bigger than that. Beyond destroying franchise relationships, the proposed standard would disrupt many other established 

contractual business relationships like staffing operations, contractor, sub-contractor relationships, and a host of possible supply 

chain relationships. 

The result would be a loss of jobs and a loss of entrepreneurial 

business opportunities which fuel the economy, including many minority business opportunities. Why would we change a bright-line 

standard and well-established black letter law, where there is no 

evidence of widespread abuse? Some have suggested that the 

change is intended to create negotiated leverage for labor unions, 

or to open new platforms for the plaintiff’s bar. 

To date, the Service Employees International Union, SEIU, has 

been unable to organize franchise operations, so some have suggested that the board is looking to rewrite the law to make it easier. Proponents of the change to the board’s standard argue that the 

change is necessary because there cannot be meaningful bargaining 

when the primary employer’s business partners are not at the bargaining table—there is no evidence for this thesis. 

Congress should understand that these are not small technical 

legal changes to labor law. The consequences of changing the current joint employer standard threatens established business relationships and will cause significant economic upheaval. 

It is well that Congress examines the effects of the board’s proposed actions on national economic and labor policy through oversight hearings. Should the board move forward with this new 

standard, I would urge Congress to consider corrective legislative 

amendments. 

Thank you very much. 

[The statement of Mr. Duffield follows:] 

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Chairman ROE. Thank you. 

Mr. Byrne, you are recognized for five minutes. 

Mr. BYRNE. Thank you, Mr. Chairman. And thank you, everybody, that gave your testimony today. That was really good. I know 

that when the ranking member was speaking, he was talking about 

whether we should be having hearings on employment. And I can’t 

think of anything that gets more to the issue of employment than 

your testimony. You create jobs. Congress doesn’t create jobs. The 

NLRB doesn’t create jobs. You do. And we should be listening to 

you, so thank you for being here today. 

Ms. Monson, I have got a question for you. I am a former management attorney with over 30 years’ experience, and it truly boggles my mind that we are even talking about a joint employer relationship in the franchise industry. We were here three months ago 

to discuss the joint employer status as a result of the BrowningFerris case, which we are all so familiar with, and the discussion 

of franchise joint employer relationship was brought up. 

My colleagues on the other side of the aisle couldn’t understand 

why the franchise industry was worried about their status as independent contractors. That was three months ago. Just one month 

later, the general counsel of the NLRB has defined McDonald’s 

joint employer before the board, and it has had a chance to make 

a decision of its own in the Browning-Ferris case. So this is a directly relevant issue for our committee. 

Ms. Monson, as a franchisor, how much control do you have over 

who your franchisees hire? How do you think a joint employer relationship will change your ability to grow as a business? And do you 

think this will help the employees of the franchisees when all is 

said and done? 

Ms. MONSON. Thank you, Mr. Byrne, for that question. 

First, I have zero - FASTSIGNS International has absolutely no 

control over who our franchisees hire. We establish brand standards for customer service, for response time, and quality of product, 

and the franchisee handles everything else. 

If this new definition of joint employer becomes law, I am concerned that it is absolutely going to destroy the franchise model. 

I don’t even understand how to protect my company from that kind 

of a slippery slope. As I struggle to maintain FASTSIGNS International with those kinds of increased costs and expenses and 

risks, I am going to have to put more and more controls on my 

franchisees. It is going to make it more difficult for them to run 

their business. It is probably going to increase their costs, and as 

costs increase, something has to give, and that could very well be 

pay raises and it could be headcount cuts. 

I don’t see any— 

Mr. BYRNE. Headcount cuts means people lose their jobs? 

Ms. MONSON. Exactly right, people losing jobs. If Clint has to 

maintain his profitability because I have put a new layer of cost 

on him because I have got to protect myself, he is not going to be 

able to necessarily raise his prices. His independent sign company 

competitors are going to be paying different wages or having different costs of doing business. And I think it is going to hurt employees. 

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I think it is also going to hurt future job growth, because franchising creates jobs, and good jobs. And even entry-level jobs lead 

to the next job, the next job, and the next job. 

Mr. BYRNE. Mr. Duffield, let me ask you a question. I was fascinated by what you were saying. We heard when the ranking 

member was speaking that this somehow detracts from the reputation of the NLRB. Do you think the NLRB, taking 30 years of 

precedent and ripping it up and throwing it away, do you think 

that helps its own reputation? 

Mr. DUFFIELD. Certainly not. Certainly not. Businesses, employers, employees, everyone depends on knowing what their rights are 

and how to conduct themselves. And when the law has been in 

place for 30 years, people can rely on that. It is predictable. It is 

a bright line test. And reverting back to an amorphous standard 

that is vague and hard to understand does not help anyone, and 

especially not the reputation of the National Labor Relations 

Board. 

Mr. BYRNE. Right. You and me and other people that are practitioners in this field, we have developed an understanding over a 

very long period of time as to what the law is. And we may fuss 

and fight with one another over exactly how it applies in a given 

case. We know what the law is. Now we are going to change the 

law, and it is going to directly affect franchise contracts, thousands 

and thousands of them in America. What will that do legally to 

people in this industry and other industries? 

Mr. DUFFIELD. Well, it is going to create more litigation. There 

are going to be lots of fights and lots of uncertainty. And the ultimate downside could be the loss of business. 

Mr. BYRNE. Thank you, Mr. Chairman. I yield back. 

Chairman ROE. Thank the gentleman for yielding. 

Mr. Pocan, you are recognized. 

Mr. POCAN. Sure. Thank you, Mr. Chairman. And, again, thank 

you to the witnesses. 

First off, you know, we are just so far ahead of ourselves. We 

don’t even know what the specific cases are they are looking at 

within the McDonald’s sample. And I think, again, this committee 

having 17 hearings on this is, I think, looking at perhaps a different mission, specifically trying to undermine the NLRB across 

the board. 

Let me just say this. I have spent 27 years of my life running 

a small printing—a sign shop, screen printing—couldn’t be any 

more understanding of—especially on the FASTSIGNS industry 

than someone who has done what I have done and my dad did before me as a small-business owner and my mom as a small-business owner. 

So I certainly understand the concerns that you have. However, 

I think what is happening here is some are trying to build a base 

to help against the folks who aren’t doing a good job in the employment area. They are trying to fan the fire, use the scrupulous to 

defend the unscrupulous, and I think that is what is really happening here, is you are finding that some people are trying to exaggerate—first of all, go after the NLRB, second, try to exaggerate 

the extent of this. 

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And I think there are new labor landscapes that we have in the 

30 years. And very specifically, when you think about the use of 

temp hiring, the issue of wage theft, the low-wage workers, the 

chronically low-wage workers, the other shady employment practices, I doubt any of your franchises would tell you that you are 

paying an employee too much. That is just not how the franchise 

model works. 

And we—actually, we almost went to a franchise model in the 

sign business, so I actually have researched this, because we were 

a step—a hair away from doing it ourselves. So if I could ask Mr. 

Freeman a question specifically, one of the other witnesses mentioned, if it is not broke, don’t fix it. And from the little example 

of the changing labor landscape that I have mentioned, it seems to 

me that the joint employer standard is broken in many areas. 

Could you expand on some of the ways that workers are not 

served well by that standard, especially around the temporary 

workers? 

Mr. FREEMAN. Yes, certainly, Congressman. The broken character of the joint employer standard is entirely related to major 

shifts in the demographics of the workforce now. We now have 

businesses that are routinely contracting out core business functions to temp agencies or franchisors are contracting out all of the 

work to franchisees while maintaining—through contractual relationships—very tight control over the terms and conditions of the 

franchisee employees. 

This means that if you want to sit down and bargain over the 

terms and conditions of employment, whether it be grooming standards, whether it be the hours of work, you do not have everybody 

at the bargaining table unless you have both the temporary staffing agency and the user employer. 

You have a triangulated employment relationship now that is 

routine in our economy. Unless you have all the players talking to 

each other, you can’t have a meaningful conversation that gives 

voice in the workplace and that can raise living standards and improve conditions, especially when you have this kind of triangulation that is really making it difficult to understand the lines of 

legal responsibility for workplace problems. 

That is what has occurred with some forms of franchising, particularly in fast food and, of course, with temping, which is now 

taking place in manufacturing, logistics, food processing, recycling. 

It is even taking place among lawyers. We now have temping as 

a normative way of pursuing core business opportunities. Unless 

we have the temp agency and the user employer at the table, we 

are going to have a problem. 

The joint employer test the board is discussing putting in place 

is merely a revival of a test that has been in place since the Supreme Court addressed it in Boise v. Greyhound, which requires 

the board to look at what is actually going on, on the ground, including the contract rights that are given to both parties and how 

those rights play out in practice? 

What you really have here is a number of employers who are 

calling the shots, but have no responsibility. That, I think, is what 

the board is looking at. And it is doing so on a fact-specific basis. 

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This is not rulemaking by the board, where the board will say 

all franchisors are joint employers. That, frankly, is ridiculous. 

That is not what the board does. It is not their function. They really adjudicate on a factual basis. And that is all the board wants 

to do, is look and see where these problems arise, whether you 

need to have everybody at the table to resolve a workplace problem. 

Mr. POCAN. And real briefly, so what you are saying essentially 

is all franchises are not the same? 

Mr. FREEMAN. No, certainly not. All franchises are not the same. 

And if you run a franchise where the franchisor basically says, I 

will take 6 percent because you use my name and my brand, I don’t 

think you have a problem with joint employment. 

Mr. POCAN. Great. Thank you, Mr. Chairman. 

Chairman ROE. Thank the gentleman for yielding. 

Dr. Heck, you are recognized. 

Mr. HECK. Thanks, Mr. Chairman. Thank you all for taking the 

time to be here. 

And I spent a fair amount of time over the August work period 

visiting with a lot of businesses in my district, many of which are 

franchises, in part preparing for this hearing to get—to understand 

what their concerns were. Several of them were hoteliers. 

So, Mrs. Panwala, what effect would joint employment have on 

the efficiency, productivity, and morale of your employees? 

Mrs. PANWALA. As an independent business owner, I have a 

great relationship with my employees. I have employees that have 

been with me for last 15 years. I know their family. I know about 

their kids. I know where they go to school. And bringing a third 

partner into this relationship, I think it would diminish the morale. 

It would definitely hurt the worker-relationship that we have between myself and employees. 

We also—you know, a few of our employees who started with us 

15 years ago, now they are business partners. So there is an opportunity for them to be in the hospitality industry. Having a 

franchisor as a partner and now they are getting involved in daily 

operations would definitely hurt our relationship with franchisor 

and the employee. And I certainly would not feel like I own my 

business anymore. 

Mr. HECK. You mentioned the term third-party in reference to 

the franchisor. In your opinion, is there any value to forcing the 

franchisor to the bargaining table with the franchisee and union in 

the event of some type of organizing activity? And what would be 

the costs or problems associated with that to you? 

Mrs. PANWALA. Like Ms. Monson mentioned, there would definitely feel like now they have more liability on their hands, so they 

would charge us probably more of a fee, but even more than that, 

I think they would have to be involved in a daily operations, just 

like setting wages, saying who I can hire, who I can fire, schedules. 

Pretty much I am the one who is taking a financial risk when 

I started by business, and now 10, 15 years later, I have a partner 

who did not take any financial risk and now is my partner without 

a choice. 

Mr. HECK. All right. Thank you. Thank you, Mr. Chair. I yield 

back. 

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Chairman ROE. I thank the gentleman for yielding. 

I believe our next is Ms. Bonamici. You are recognized. 

Ms. BONAMICI. Thank you very much, Mr. Chairman. 

I wanted to start—well, first of all, by thanking all of our witnesses today for being here. Many years ago in one of my other 

lives and when I was in the private practice of law, I actually had 

a practice in franchise law, and I represented franchisees, typically 

in disputes with franchisors. So I was particularly interested in 

this hearing today. 

And I wanted to start by saying that, you know, the NLRB general counsel—he has authorized a complaint. That action doesn’t 

say or even imply in my opinion that every franchisor is a joint employer or would be a joint employer. There are likely hundreds, if 

not thousands of franchisors in dozens of sectors across the country. In fact, the chairman said something about 557,000 franchisees 

across the country. And even though their basic business model is 

similar, we know that they operate differently. 

We have heard that so much this morning. A tax service franchise isn’t necessarily going to be the same as a vending machine 

franchise. And a sign franchise is not necessarily going to be the 

same as a fast food franchise. So as this case moves forward, and 

procedurally, if the general counsel’s position is upheld through 

many procedural steps and appeals, and whether or not there is a 

joint employer status would depend on the totality of the circumstances. 

That would include, of course, how the relationship is structured 

and how much influence or control there is over the franchisees’ 

employment practices. 

So, Mr. Duffield, you said that large-scale franchisors who retain 

only the control required to protect their brand, trade name, and 

trademark could be drawn into hundreds of collective bargaining 

relationships where they have little or no involvement in the workplace. So my question is, if they have little or no involvement in 

the workplace, and they only retain the control needed to protect 

their brand and trademark, wouldn’t the totality of the circumstances show that they are not a joint employer? 

Mr. DUFFIELD. Well, it should. And under the current standard, 

it does. However, the general counsel’s proposed standard not only 

focuses on this potential control, but also on an economic dependence. And all franchisees economically depend on the franchisor. 

Therefore, they could be brought into collective bargaining under 

that standard. 

Ms. BONAMICI. Well, I am going to ask Mr. Freeman in just a 

minute to follow up on that, but I wanted to really follow up on 

Mr. Ehlers’ and Ms. Monson’s testimony, because, Mr. Ehlers, you 

said that your franchisor in response to the potential change in the 

joint employer standard—and here is what you said in your testimony—‘‘will take measures to protect itself that will end up reducing your autonomy as a franchise owner.’’ 

Now, I am a little bit baffled by Ms. Monson’s testimony that she 

would be ramping up control if this were the standard. So it seems 

that if franchisees and franchisors are both so concerned about the 

prospect of joint employer status, wouldn’t it be more likely that 

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the franchisor would take measures to increase your autonomy so 

that it would be less likely that you would be a joint employer? 

Both of you. I was baffled by what your testimony said. It seems 

to me contrary to what common sense would be. 

Ms. MONSON. Do you want me to try first? 

Mr. EHLERS. You go ahead. 

Ms. BONAMICI. Go ahead. 

Ms. MONSON. First off, we are at a little bit of a disadvantage 

in that we don’t know all of what the general counsel’s opinion is 

based on. We can only infer from the Browning-Ferris amicus brief. 

But in the Browning-Ferris amicus brief, it tends to indicate operational control, system-wide control, brand standard control. 

So as a franchisor, I need to make a decision, and I think every 

franchisor will have to make that decision on their own. Whether 

I go for more control over my franchisees to protect myself from increased risk, vicarious liability, all kinds of issues like that, or 

whether I scale back my control, in which case my brand may be 

hurt. If I can’t maintain good brand standards, high customer service, high-quality product, high-quality production within the centers, then the FASTSIGNS brand-name will be deteriorated over 

time. 

So each franchisor will make their own decisions. Either we will 

give less support so that we won’t be seen as joint employers, 

which could hurt the brand, leading to declining sales, or we give 

more. 

Ms. BONAMICI. And I am going to have to ask you to—I want to 

ask Mr. Freeman to follow up on this, because it seems like the 

franchisors want to have it both ways. They want to have—your 

testimony said that fast food workers, they referred to a high level 

of control over the workers and conditions of employment. You laid 

out specifics. They control their—every one of the contract provisions, dictated by the franchisor, directly impacts terms and conditions of employment that are the core of collective bargaining 

issues. 

So I wondered if you could say, do you agree with the general 

counsel’s directive that does not indicate that every franchisor will 

be a joint employer? It would be— 

Chairman ROE. Mr. Freeman, you have to hold up on that and 

someone else is going to have to follow up. Time is expired. 

Ms. BONAMICI. And I will follow up on that and ask you to respond in writing. 

Chairman ROE. Mr. Kelly, you are recognized. 

Mr. KELLY. Thank you, Chairman, and thank you all for being 

here. I am a franchisee. I am a Chevrolet, Cadillac, Hyundai, and 

Kia dealer. And as such, I have watched this evolve over the years. 

My father actually started our business in 1953 after being a parts 

picker before the war in a Chevrolet warehouse, then coming back 

and being able to start with a little one-car show, with about five 

service bays, and building into something we are very proud of. 

So, Mr. Ehlers, Mrs. Panwala, thank you so much for what you 

do, because it is the American Dream you are talking about. And 

I have got to tell you, I have never had one month at the end of 

the month, when everything is over and done with, that Chevrolet, 

Cadillac, Hyundai, or Kia have ever called me and said, ‘‘You know 

CEWDOCROOM with DISTILLER

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what, Kelly? Tough month. You didn’t make any money. What can 

we do to help keep you open?’’ Just doesn’t happen. 

Mr. EHLERS. Not at all. 

Mr. KELLY. And this idea that somehow we have this joint relationship is absolutely ridiculous. Now, Chevrolet, Cadillac, Hyundai 

and Kia determined for me, because of our market size, what we 

have to do to serve our customer base. I think that makes sense. 

We do rely on collective information, on collective experience over 

the years in how we would run a successful business model. 

Professor, you made a statement that franchises equally profitable as evidenced by the fast food sector of the restaurant industry, 

where in 2010 the largest franchises employed over 2.25 million 

workers, earning more than $7.4 million—or billion in profits, and 

distributed another $7.7 billion in buybacks and dividends to 

shareholders. 

Would it be your assumption that these profits—there was a tax 

paid on those and that these shareholders paid a tax on these? Because here is the problem. Where does the money come from to run 

this wonderful organization we call the U.S. government? Where 

does the money come from that supplies the safety net for all these 

people, if it were not for profitable businesses and people making 

money? 

I think sometimes we forget, it is not the government that provides one single penny to run this machine. It is hardworking taxpayers. Mrs. Panwala, you described what you went through to 

start your business. Mr. Ehlers, you described what you went 

through to start your business. Thousands upon thousands of 

Americans have been able to live the American Dream and been 

able to employ thousands upon thousands and millions of American 

workers and allowed them that first step into getting to be an entrepreneur, your own entity. Why in the world would we try to 

upset the apple cart? 

Mr. Duffield, you really make a great statement: if it ain’t broke, 

don’t fix it. We should have started this decades ago in this entity 

here, in government. Keep in mind, this is a process that is working at $18 trillion in the red and is going to go out and tell you 

how to run your business. Doesn’t that make sense? Anybody hiring them as business consultants? 

So my question to you, Mr. Ehlers—and I know, Mrs. Panwala, 

you already said it, would you ever put yourself out the way you 

have put yourself out to go into business for yourself if you knew 

you were going to have the heavy hand of the government come 

down, put its heavy boot on your throat, make it harder for you to 

breathe? Would you still do it? Would you still go out and move 

from California to Pennsylvania? 

Mr. EHLERS. Well, one of the main reasons I actually moved from 

California to Pennsylvania was several local regulations that the 

state was trying to implement having to do with my business, state 

income tax, all sorts of other things. It is—to your question, no, I 

wouldn’t. 

I would do something else. I am an entrepreneur, and I am out 

there doing things, but I wouldn’t—I certainly probably would not 

sign up for the franchise model because when I wanted to go into 

business for myself, I wanted to go into business for myself. I wantCEWDOCROOM with DISTILLER

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ed the value of what FASTSIGNS brings to the table with a proven 

business plan and also the network of other independent businessmen that own FASTSIGNS, that have done and been through the 

trenches and have come out successful and others not so successful 

to learn from that. 

What is great about FASTSIGNS is that they collect best practices from our franchise system. They pull all that together, and 

they disseminate that back to us. It is one of the benefits of not 

being an independent sign shop like you, Mr. Pocan, is that we 

have a collective knowledge that they offer us. 

It does not make us joint employers. It does not make them tell 

me what I have to do for my employees. 

Mr. KELLY. And just excuse me, because we are running out of 

time, but the reality of it is, you moved from California to Pennsylvania because of an opportunity. 

Mr. EHLERS. Yes, sir. 

Mr. KELLY. All right. And we really say about America, there is 

equal opportunity, not equal outcome, but there is equal opportunity, and that is all we are looking for. 

Mr. EHLERS. Yep. 

Mr. KELLY. But you are always looking for a place that you can 

do business more successfully, because the true value of a business 

is being able to be profitable and stay in business. Otherwise, you 

go by the wayside. 

Mrs. Panwala, I really admire what you have been able to do, 

you and your husband, to come here and start with what you started and to continue to grow it. That is America. 

Mrs. PANWALA. Just to say a couple of things, you know, it is an 

American Dream to own your own business. Somebody like me, 

who came from India at age 15 with a family, with my dad having 

$6 in his pocket and working hours and hours, while going to 

school and to get our first hotel at age 22, it was an American 

Dream. 

If I knew at that point that the government or somebody is going 

to come to me and say, nope, this is not your business anymore, 

now you have somebody else as a partner, even though I took all 

the risk at age 22, I probably would have been very hesitant to 

enter into the hotel business. 

So, yes, to answer your questions, I would not have, and I would 

not have been a person who created, personally, many jobs and reinvesting back into my business. 

Mr. KELLY. Thank you so much for being here. My time is expired. 

Chairman ROE. Gentleman’s time is expired. 

Mr. Scott, you are recognized. 

Mr. SCOTT. Thank you, Mr. Chairman. 

Mr. Freeman, as I understand your testimony, the new joint—the 

new standard would not require all franchisees and franchisors to 

be considered joint employers. Is that right? 

Mr. FREEMAN. That is completely correct. This is not a rule that 

is being discussed by the board to apply to every franchisor/ 

franchisee relationship. It is a fact-specific inquiry that will include 

looking at the contractual relationship both in writing and in practice between a franchisor and a franchisee to see whether there is 

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the level of extensive control such that it affects core terms and 

conditions of employment that require all three parties to be at a 

bargaining table or to hold them liable for an unfair labor practice. 

Mr. SCOTT. If the total control is exercised by the franchisee, 

there would be no joint status. Is that right? 

Mr. FREEMAN. That is completely correct. But in other circumstances, you have terms and conditions that are being imposed 

by franchisees that are really undermining— 

Mr. SCOTT. Franchisors. 

Mr. FREEMAN.—the American Dream. 

Mr. SCOTT. Imposed by? 

Mr. FREEMAN. Imposed by franchisors—I am sorry, I misspoke— 

that are really undermining the American Dream. When you have 

a fast food franchisor that encourages its employees to go apply for 

food stamps or to go on welfare in order to make ends meet, that 

is not the American Dream. When a temp worker has no future or 

long-term job and no opportunity for vacations or any forms of benefits, that is not the American Dream. 

And every employer who has a say in that person’s terms and 

conditions of employment should be at the bargaining table to give 

these workers the opportunity to bargain, to rectify those sorts of 

problems. That is where the joint employer test that the board, in 

my view, is looking to apply to look at situations where you have 

co-determination of the terms and conditions of employment. 

I don’t agree with Mr. Duffield and I don’t think that this is 

about a question of the board determining economic dependence. It 

is really about co-determination of terms and conditions of employment on the ground, in the workforce. 

Mr. SCOTT. And I think you said in practice, if that franchisor 

technically has the right to intrude and make—impose standards, 

but in practice doesn’t, would that—how would that play out? 

Mr. FREEMAN. Well, I think, Mr. Scott, what you are asking is, 

what would the fact-finding actually be like at the board? And I 

don’t want to venture an opinion on any particular set of facts. I 

think those kinds of questions is what the inquiry is actually about. 

How does the relationship on paper shake out in practice? And 

I think that the totality of circumstances, analysis that the board 

has engaged in, in its traditional test—and I think that is what the 

board is looking to do again. Right now, the test has been interpreted in a ridiculously narrow way such that the only time you 

have joint employment is if you are the business that actually tells 

the worker to turn the screw or fill the drink. 

That is not the way the modern workplace works. Direct control 

over terms and conditions of employment are exercised by contractual relationships, by monitoring, by checking, by all sorts of hightech devices that allow franchisors and user employers to control 

the terms and conditions, even though they may not be the party 

that is actually handing out the paycheck. 

Mr. SCOTT. Now, everybody has talked about protecting the 

brand. What kind of conditions of employment can be imposed 

under the auspices of protecting the brand? 

Mr. FREEMAN. Well, I think it is rather extensive in certain industries. In order to protect the brand, a fast food franchisor may 

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actly alike, the hours of work to be the same. They may want workers to only work certain shifts at certain times. All of those questions are things that workers have a right to bargain about with 

the employer who controls those terms and conditions. 

When you have those sorts of circumstances, joint employment 

may certainly arise. Merely telling someone what size the letters 

should be on their sign outside the door isn’t what we are talking 

about. We are talking about things that affect workers, and particularly workers, many of whom are in very low-wage occupations 

who cannot alter the circumstances of their life, unless they really 

talk to the user employers in the temping industry or to the 

franchisor in the franchising sectors. 

Mr. SCOTT. The gentlelady from Oregon asked a question that 

you didn’t have time to respond to. It says about the doomsday predictions that would change if we changed the standard. Do you 

want to respond to that? 

Mr. FREEMAN. I don’t think it would lead to the downfall of Western civilization or the free enterprise system in any way at all. In 

fact, it has been the case in recent years that other government 

agencies have been much more aggressive in applying the joint employment standard— 

Chairman ROE. Mr. Freeman, could you hold up for the next— 

Mr. FREEMAN. This is true— 

Chairman ROE. Mr. Scott’s time is expired. 

Mr. FREEMAN. I am sorry, Chairman. 

Mr. SCOTT. Could he finish that sentence? Just that sentence? 

Okay. 

Mr. FREEMAN. I will do it. It is just one sentence. We now have 

the Fair Labor Standards Act in the Department of Labor enforcing joint employment. It is enforced under Title 7. It is enforced in 

many states in areas of unemployment insurance. This is nothing 

extraordinary, except bringing up the standard with respect to the 

modern workplace. 

Mr. SCOTT. Thank you, Mr. Chairman. 

Chairman ROE. Thank you. 

Mr. Wilson, you are recognized. 

Mr. WILSON of South Carolina. Thank you, Mr. Chairman. And 

thank you for this very important hearing. What we are talking 

about is economic freedom, the ability to operate your own business 

successfully. And, Mrs. Panwala, I have had the opportunity to live 

your dream, and that is my dad served in the Flying Tigers during 

World War II. And so as the little guy, as I was growing up, he 

told me how entrepreneurial and capable the people are of India, 

South Asia, and it exciting to me when the Desai family came to 

our community to start a tiny little motel. 

I said, ‘‘I know who you are.’’ And then I worked with the Patels, 

the Shahs, the Shevastavahs, Sindhas, and I saw the success. And 

in my home state of South Carolina, it is just extraordinary the 

economic opportunity that has been provided due to the success of 

Asian-Americans creating entry-level jobs. It has just been a marvel. 

So I want to thank you. And it seems we have had a good success, Mr. Chairman, we are very thankful to the Mondello family; 

we have had Benny Cayetano here—the second Asian-American 

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governor in the United States; Also, very significant, in the United 

States, the first female governor in 340 years— 

But in the Asian-American community, it makes such a differnce, 

because you can run your hotel on the family members—they did 

everything, they didn’t just start out as a high income community 

in the United States. They didn’t start out having the highest-percentage of millionaires. It was because you could run your business—and then you made that clear, and I want to thank you. 

In your testimony, you said you paid particular attention to what 

you expect from your franchisor—after reading the contract, what 

were your expectations from the franchisor? You didn’t expect the 

relationship to change— 

Mrs. PANWALA. Thanks so much. You know, basically what I just 

said is that it is not just for me, it is for hotel owners who have 

gone through the same situation—gone through the same thing as 

myself—corporations have different motives as an individual hotel 

owner, from one hotel to the next. I want to make sure I am involved in that—involved in that business. And that is—I think that 

is what the issue is, that if franchisors are all of a sudden a joint 

employer with the franchisee, they will feel that they have more liability and they will want to be involved in day-to-day operations, 

plus making sure that who you are hiring, who you have at your 

hotel, in pretty much daily activity, which for me as an independent business owner, I would lose that independence. 

Thank you. 

Mr. WILSON of South Carolina. It is independence. It is opportunity, entry-level jobs, it is so meaningful in the communities I 

represent. And also, the International Franchise Association, Ms. 

Monson, I want to thank you, Mr. Ehlers. You all make a difference. 

Is there any—and, Ms. Monson—in your opinion, is there any 

value in forcing the franchisor to the bargaining table with the 

franchisee and union? What are the costs and problems? 

Ms. MONSON. Well, first, I understand that unions are challenged 

these days to grow membership. And I know that is part of what 

is trying to be accomplished here. 

But I go back to what has worked for FASTSIGNS and what has 

worked for the prior franchisors that I have been involved with and 

what has worked for so many different franchise companies. If 

FASTSIGNS International was required to come to the bargaining 

table, it would certainly increase our costs, it would increase—it 

would be a drain on our resources. And it would limit my ability 

to service and support our franchisees, to help our franchisees be 

more successful. 

I see no positive outcome at all. I see it as a slippery slope, a 

dark abyss, and I have no idea where it would end. 

Mr. WILSON of South Carolina. Well, I share your concern. And— 

because running your own business, that is the key, and being a 

franchisee, that is so beneficial. But you have got to run your business, and we should surely understand that every community is 

different and things change. 

So thank you, again, for being here. And I am just so proud of 

you all’s success. And appreciate the chairman’s leadership. 

Chairman ROE. I thank the gentleman for yielding. 

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Mr. Hinojosa, you are recognized for five minutes. 

Mr. HINOJOSA. Thank you, Chairman Roe. 

The focus of today’s hearing is a real disappointment to me. Unfortunately, my colleagues on the other side of the aisle have once 

again chosen to use this subcommittee’s time to undermine the 

NLRB. It is worth noting that Republicans have held no less than 

17 hearings or markups aimed at undermining the NLRB’s decisions and policies and procedures while ignoring the key issues affecting the lives of American workers. 

As a senior member of this committee, I believe that we should 

spend more of the committee’s time on helping to strengthen the 

middle class. 

Is it not on? 

[Hearing suspended while Mr. Hinojosa moves to a working mic.] 

Mr. HINOJOSA. Mr. Chairman, can you hear me? 

Chairman ROE. Yes. 

[Laughter.] 

Mr. HINOJOSA. Well, I certainly wanted to be on the record, and 

I was concerned. At this time, I have questions for some of our distinguished panelists. Professor Freeman, in your expert testimony, 

you indicate that the NLRB’s decision to take a hard look at its 

joint employer standard is both reasonable and practical as a 

means of considering how millions of low-wage workers can meaningfully exercise their fundamental right to collectively bargain 

with their employers. 

Can you describe for me how employers using temporary staffing 

firms co-determine the terms and conditions of employment for 

those workers? 

Mr. FREEMAN. Certainly. Today, temporary staffing is no longer 

structured to simply have a temporary worker come in and fill in 

for an administrative assistant who is out of work for a week or 

a few days. What we now have is large concentrations of temporary 

staffing workers that many people call perma-temps, because they 

are employed regularly and routinely doing the core business functions of a user employer. 

What this means on the ground is that the supervisory and management staff of the user employer is directing on a day-to-day 

basis the work conditions of these temporary workers. They are responsible for health and safety. They set the line speed in a manufacturing setting. They may require certain forms of equipment and 

training of this temporary workforce. 

Yet under current board standards, there is no obligation to have 

that user employer at the table when discussing any of the wages 

or working conditions of those temp workers. It makes absolutely 

no sense when you disaggregate employer functions not to require 

everybody to come together to actually talk about how to fix problems. 

All we are doing here is putting everybody at the table who actually has a say and a role in the production or services that are 

being rendered. The reason the joint employment standard has become controversial is not because the board is seeking to employ 

a standard that is in any way radical or new. Rather, it is simply 

wanting to revert a standard that was long in existence to address 

rapidly shifting demographics in the workplace. That is the board’s 

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obligation under the powers granted to it by this Congress and approved by the Supreme Court of the United States. 

Mr. HINOJOSA. Professor, I understand that contingent or, as we 

call them, temporary workers are, on balance, paid less, have inferior access to benefits, and oftentimes suffer health and safety violations at a greater rate than other workers in the private sector, 

but by the same token cannot bargain for better conditions due to 

the current joint employer standard. 

So can you also discuss how the current narrow standard prevents the workers from engaging in meaningful collective bargaining? 

Mr. FREEMAN. The narrow standard is preventing having the 

user employers at the bargaining table because the standard requires that there be this form of direct and immediate supervision. 

The standard—when you look at the temporary staffing industry 

and how it functions—makes little sense given that the temporary 

staffing industry is often not on the job site at all. They don’t really 

have any role, except administerially, administering payroll, workers’ compensation benefits, and the like. 

In that regard, you have actual control being exercised completely by an employer who under current board standards plays 

no role in the process of collective bargaining. I don’t see where 

that makes sense in the modern workplace. 

You have right now major manufacturing centers of the United 

States—in auto and other sectors—where you have half the workforce being sent there by a temp agency. They make less than the 

workers who are direct hires. They are doing exactly the same 

things. Yet the user employer has to bargain with respect to the 

direct hires, but not the temps. 

Mr. HINOJOSA. My time— 

Mr. FREEMAN. Now that is pretty irrational. 

Mr. HINOJOSA. My time has expired. And I thank you for responding to my questions. 

Mr. FREEMAN. Thank you. 

Chairman ROE. Thank you the gentleman for getting through his 

testimony today. It— 

Mr. HINOJOSA. Thank you for helping me. 

Chairman ROE. Dr. Price, you are recognized. 

Mr. PRICE. Thank you, Mr. Chairman. And I want to thank you 

for holding this hearing. I want to thank the witnesses. I apologize 

for not being here for the entire portion of the hearing. I was able 

to read some of the testimony before. 

My friends on the other side talk about the NLRB and say, well, 

why are we having all these hearings? Seventeen hearings on the 

NLRB, why—why on Earth would we be doing that? Well, to quote 

my good friend, these are actually, ‘‘key issues’’ that affect workers. 

What we are trying to do is to build the middle class, is to make 

certain that jobs are being created out there across the economy. 

And so when we see activities and rulings and decisions by the 

NLRB that actually harm job creation and decrease economic vitality in this country, then it is incumbent upon us to have hearings 

and talk about it and educate our colleagues and the American people about what is going on in this administration. 

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Mr. Duffield, I have been really impressed with the remarkable 

success of the franchisee business. Each and every day, hardworking entrepreneurs across this country go to work, they provide 

for their families, they offer jobs to the community, and they create, again, that much-needed economic growth in our communities. 

For years, franchisee owners have had a degree of regulatory certainty that they could rely upon in building their business. However, as many of us believe, this joint employer ruling will throw 

all that to the wind. 

I want to ask you, how does this ruling affect the value of a 

franchisee business? And could this ruling effectively end the 

franchisee business model? 

Mr. DUFFIELD. I think that is a serious risk. As we have heard 

already from Ms. Monson and Mrs. Panwala and Mr. Ehlers, if the 

franchisor is going to be held responsible for the unfair labor practices in a workforce where they are not involved, they are going to 

have to get involved. They are going to want to be there and provide some oversight. That is going to increase their costs and it is 

going to affect their business model. 

On the franchisee side, Mrs. Panwala has testified several times 

today that the reason she got into this business is because she has 

got an entrepreneurial spirit about her. And if that gets taken 

away from her because somebody else is coming in and looking over 

her shoulder, I think fewer and fewer minority business owners are 

going to want to embark on that endeavor. 

Mr. PRICE. Mr. Freeman just told us that nothing about this ruling is, ‘‘radical or new.’’ Your opinion? 

Mr. DUFFIELD. I disagree. I think this could radically change the 

economic landscape for not only just franchisors, but lots of other 

industries. You know, we focused a lot today on the franchisor/ 

franchisee context and industry, but I think the implications here 

expand much broader than just that. We are looking at staffing 

agencies. He has talked about the temp services situation. We are 

looking at, you know, the contractor/subcontractor situations, you 

know, lots of other industries other than just franchisors and 

franchisees. 

Mr. PRICE. Yes, we would agree. And goodness knows the economy needs to be helped, not harmed, and so many of us believe 

that this is actually harmful. If McDonald’s is a joint employer, is 

anybody not a joint employer? 

Mr. DUFFIELD. Right. 

Mr. PRICE. Ms. Monson, I appreciate your comments. You also 

said that there was no positive outcome that you could see coming 

from this joint employer ruling. Why do you think they are moving 

forward with this? 

Ms. MONSON. I believe that this is an attempt to help build 

union membership. 

Mr. PRICE. Pretty stark, isn’t it? 

Ms. MONSON. Yes. 

Mr. PRICE. I have a gentleman in my district, in the Sixth District of Georgia, who owns 23 franchise restaurants—he communicated with our office. He doesn’t want his name to be divulged, 

because of some other concerns we have had about the administration punishing folks that step up and express their concerns. 

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He has been extremely concerned and petrified with what this 

joint employer ruling would do to his business. He started with one 

franchise and grew it into 23 stores. Why do you think so many 

franchise owners from my district, and across this country, are concerned about the potential fallout from the decisions that the 

NLRB general counsel has made as it relates to McDonald’s and 

the franchisee joint employers? 

Ms. MONSON. Franchisees around the country are fearful of losing their independence, having the value of their franchise decrease. Every person who owns a business today plans to sell it at 

some point in the future or pass it on to their family, and they 

don’t want to see valuations decline because of this increased risk 

and change in the law. 

Mr. PRICE. Mr. Chairman, what we have here is a red flag being 

waived in front of the country that says, ‘‘This is going to harm job 

creation.’’ It is going to harm businesses across this country. It is 

time to stop this ruling. Thank you. 

Chairman ROE. Thank the gentleman for yielding. 

I am going to ask a few questions. And, you know, we asked why 

we had 17 hearings on the NLRB. This NLRB is the most activist 

NLRB in anybody’s memory. We look at the Boeing situation. In 

the great state of South Carolina, where a billion-dollar investment 

was almost snuffed, and there was no job loss in Everette, Washington. Now there are thousands of people with good-paying jobs 

taking care of their families. They would have done away with— 

I found that absolutely astonishing to me. 

Ambush elections, where you can have—look, we have a system 

that has worked for a long time, where both sides get a chance to 

put their testimony out there and make their case. We had that 

election in Volkswagen in Chattanooga in my state not six months 

ago. And the people decided what they wanted to have, after they 

were fully informed. But it didn’t happen in 10 days, I can tell you 

that. 

Micro-unions. And, you know, I—we have 30 years, as Mr. 

Duffield has pointed out, of bipartisan agreement with the NLRB 

about this. And yet now there is some big emergency that is going 

on. We should be looking in this country about how we create jobs 

for people. 

As I stated when I opened up, nine million people don’t have 

health insurance that did since 2009 during this, quotes—‘‘recovery.’’ And we are having a hearing today that I hear right now may 

stifle job creation. I am just a simple doctor from East Tennessee. 

But I tell you how I knew who my employer was: who wrote my 

check. That is who I worked for. 

And I heard Mr. Ehlers say that basically he had to go out and 

borrow the money. His banker didn’t call Ms. Monson for the payment at the end of the month. It called you for that. Am I right 

about that? 

Mr. EHLERS. Yes, sir. 

Chairman ROE. And you very clearly stated it, did they help you 

fill out your taxes at the end of the year to find out what your tax 

liability is? You were able with the—and I was an employer for 

over 30 years. And you are absolutely right. When you describe this 

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family was having some issues about, how do I help that—it is a 

good employee, obviously. 

Mr. EHLERS. Yes, sir. 

Chairman ROE. A great employee. And with 14 people, you know 

all the—you know when they get married, when they go to the hospital, whatever happens to them. I guarantee you do. 

And so you work with this good employee to make sure that their 

son could get to what they needed. Maybe it was a single parent. 

I don’t know. Would you just comment on those things? 

Mr. EHLERS. Yes. I mean, I am very involved—as much as a 

friend/owner/boss can be—in my employees’ lives. I fully understand, especially with this employee, he is a very valued employee 

of mine. He has a 12-year-old son who he did not want to leave at 

home by himself with a computer during the summertime. His wife 

makes more money than him. She has a great job, so she obviously 

couldn’t take off. 

And they had to make arrangements, albeit late in the season, 

to find daycare. And we worked it out to where he could bring his 

son in to work and work for me. I grew up in a—my dad owns a 

roofing company, started in 1960, independent. I have been working since I was probably eight years old, slinging shingles and 

whatever else. I have been— 

Chairman ROE. Be careful. The Department of Labor might be— 

Mr. EHLERS. Yes, absolutely. 

[Laughter.] 

So I have—I know the value of hard work. I have made minimum wage. And it was an entry-level job for me. But it fueled me 

to do more. We talk about the American Dream. The American 

Dream is to do more, to take opportunities as they come along, 

entry-level positions, entry-level pay, and do more with that and 

learn and move on. 

It was not something—the American Dream is not something for 

the government to control. The government should not set the 

American Dream for employees and give—they don’t create jobs. 

So I have another quick example. I have an employee—I bought 

the Lancaster store. It was a struggling store. I bought it because 

it was struggling and I could turn it around. Fairly overstaffed. I 

had to make some very hard decisions. I had an employee who was 

married, young, both of them making not a lot of money. She needed a job, but her job was not necessary in my company anymore. 

I worked with her. I gave her six—I am sorry, 60 days to go find 

another job. Right? She knew she was going to be—her position 

was eliminated, but I gave her 60 days to go find another job, because I did not want her and her husband to be without a paycheck. 

If they controlled that, that would not have happened, and she 

would have been out on unemployment. Now, she found a job—and 

I even gave her a financial incentive to do it in 45 days. She found 

it in 50 days, and she found a job making more money than what 

I was paying her, and it is actually in a career that she actually 

went to school for. 

So that is a typical situation in a responsible business owner that 

I would not have been able to make, had I been jointly controlled 

by FASTSIGNS Corporate. 

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Chairman ROE. Well, I am going to have to gavel myself down, 

but there is one other question that, Mr. Duffield, I would like to 

have you answer otherwise, about—afterwards, is indirect control 

and potential control. That is a slippery slope that I can’t imagine 

how you would ever get by potential control. And that is what 

these folks are talking about. 

Once again, I would like to thank our witnesses for taking time 

to testify. It has been great testimony, been a lively discussion. I 

know you have spent a lot of time preparing. We appreciate you 

doing that. And I will now yield to Mr. Pocan, our ranking member, 

for any closing comments. 

Mr. POCAN. Sure. And, again, thank you, Mr. Chairman. 

You know, in listening to the hearing, I think what we said in 

the beginning really hasn’t changed much as far as the focus. You 

know, I think one of the things that is very clear—and I know a 

little bit about, again, this model—Ms. Monson, you don’t have any 

direct relationship on the employees at the FASTSIGNS in Mr. 

Ehlers’ community. And you are not going to be in the same case 

as the employers we are talking about. 

The problem is, as we have talked about the American Dream— 

and I agree. Both my parents are small-business owners. I am a 

small-business owner. I really know nothing other than being in 

small business. That is in my entire life. 

But I do know that a lot of people are not getting access to the 

American Dream. Millions of people who are negatively affected by 

the unscrupulous players that we are trying to go after, and that 

means the folks who use the temp industry. I have got a constituent, four years she is a temp as an electrician. They lay her 

off when there is no business. She gets no benefits whatsoever. And 

she is making less than she would if she was in the field at another 

area. 

There is wage theft. There is the chronically low-wage workers 

that we are dealing with throughout the problems that NLRB is 

trying to address. So we do want access to the American Dream for 

each and every American. And I want it just as much for the smallbusiness owner, which I am as well, but I want it for that worker. 

And for those businesses that aren’t participating, like you all are, 

we need to make sure that those folks are protected and that the 

NLRB is looking at direct violations by what is happening either 

through this contingent or temp worker, people who aren’t getting 

the same access to the benefits and the pay, or through some of the 

bigger franchisers, especially in the fast food industry, who are 

abusing that relationship. That is what has to happen. Everyone 

deserves that American Dream, and I appreciate you sharing your 

stories and, like I said, your stories in many ways are my stories. 

As a kid, I was working at my parents’ business, go in there 

and—you know, in fact, one of the early, early sign franchises was 

Budget One Hour Sign. How is that for knowing way, way back, 

the old inking the wooden type? That is what my dad first had. 

So I appreciate everything that you are doing and saying, but I 

think what we are trying to do is go after the folks who are doing 

unscrupulous practices. That is what it is going to be directed towards. And we need to make sure that every single person, includCEWDOCROOM with DISTILLER

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ing those who are working as temps and contingent workers, have 

access to have that opportunity for their families, as well. 

Chairman ROE. I thank the gentleman for yielding, first of all. 

Secondly, thank you all for being here today. And I want to close 

by saying that the way I had understood the NLRB to work was 

it was to be a fair arbiter. It is like a referee in a ballgame. When 

you go on the road and play basketball, which I did, you expected 

to get a fair call. And that is exactly what we expect NLRB to do, 

not to tilt it one way or the other. 

You have a right to organize in this country. And I think that 

labor laws also apply to temporary agencies and OSHA requirements apply to those same things. I don’t think they can avoid 

those. So all those things, I think, that you bring up, they are already laws out there to protect workers from those things. 

I think the franchisee model, we have seen across the country, 

and two unbelievable examples today that you all brought here 

about how you have been successes, but you started—and, Mrs. 

Panwala, I wanted to ask you, just—you sound like an intern at 

a hospital. I wanted to ask you what you did in your spare time. 

You worked. You were the plumber. You were the electrician. You 

cleaned. You were at the front desk. I am sure you felt like you 

were never going to be successful. 

It is an amazing, amazing story. And it is repeated across this 

country hundreds and thousands of times each day. And you take 

a—I mean, there are stories in this very room—and I have one sitting right here to my right—that has been successful as a smallbusiness owner. And we need to encourage that and make it easier 

for small-business owners. 

We have 43 jobs bills we have passed in the House, 43, that are 

sitting in the U.S. Senate right now with no action, 43, that would 

help increase wages, would help increase employment in this country, and we are under-employed right now. There are jobs out there 

that people don’t have the skills to meet. 

I, as many others, went to 20 or had 20 manufacturing plants 

I visited this summer during the recess and met with them. And 

there are jobs open that we have—we just passed a Workforce Investment Opportunity Act that will help hopefully fill those jobs. 

So I think this would be a terrible, terrible decision by the NLRB 

that would stop one of the very successful parts of our economy. I 

want to thank you all for being here. We will continue our very 

close observation of the NLRB. And with no further comments, this 

meeting is adjourned. 

[Additional submissions for the record by Chairman Roe follows:] 

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[Whereupon, at 11:42 a.m., the subcommittee was adjourned.] 

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