[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]


                      REDEFINING EMPLOYER AND THE
                      IMPACT ON ALABAMA'S WORKERS
                       AND SMALL BUSINESS OWNERS

=======================================================================

                              FIELD HEARING

                               BEFORE THE

                        SUBCOMMITTEE ON HEALTH,
                    EMPLOYMENT, LABOR, AND PENSIONS

                         COMMITTEE ON EDUCATION
                           AND THE WORKFORCE

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

            HEARING HELD IN MOBILE, ALABAMA, AUGUST 25, 2015

                               __________

                           Serial No. 114-25

                               __________

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                COMMITTEE ON EDUCATION AND THE WORKFORCE

                    JOHN KLINE, Minnesota, Chairman

Joe Wilson, South Carolina           Robert C. ``Bobby'' Scott, 
Virginia Foxx, North Carolina            Virginia
Duncan Hunter, California              Ranking Member
David P. Roe, Tennessee              Ruben Hinojosa, Texas
Glenn Thompson, Pennsylvania         Susan A. Davis, California
Tim Walberg, Michigan                Raul M. Grijalva, Arizona
Matt Salmon, Arizona                 Joe Courtney, Connecticut
Brett Guthrie, Kentucky              Marcia L. Fudge, Ohio
Todd Rokita, Indiana                 Jared Polis, Colorado
Lou Barletta, Pennsylvania           Gregorio Kilili Camacho Sablan,
Joseph J. Heck, Nevada                 Northern Mariana Islands
Luke Messer, Indiana                 Frederica S. Wilson, Florida
Bradley Byrne, Alabama               Suzanne Bonamici, Oregon
David Brat, Virginia                 Mark Pocan, Wisconsin
Buddy Carter, Georgia                Mark Takano, California
Michael D. Bishop, Michigan          Hakeem S. Jeffries, New York
Glenn Grothman, Wisconsin            Katherine M. Clark, Massachusetts
Steve Russell, Oklahoma              Alma S. Adams, North Carolina
Carlos Curbelo, Florida              Mark DeSaulnier, California
Elise Stefanik, New York
Rick Allen, Georgia

                    Juliane Sullivan, Staff Director
                 Denise Forte, Minority Staff Director
                                
                                
                                ------                                

        SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR, AND PENSIONS

                   DAVID P. ROE, Tennessee, Chairman

Joe Wilson, South Carolina           Jared Polis, Colorado,
Virginia Foxx, North Carolina          Ranking Member
Tim Walberg, Michigan                Joe Courtney, Connecticut
Matt Salmon, Arizona                 Mark Pocan, Wisconsin
Brett Guthrie, Kentucky              Ruben Hinojosa, Texas
Lou Barletta, Pennsylvania           Gregorio Kilili Camacho Sablan,
Joseph J. Heck, Nevada                 Northern Mariana Islands
Luke Messer, Indiana                 Frederica S. Wilson, Florida
Bradley Byrne, Alabama               Suzanne Bonamici, Oregon
Buddy Carter, Georgia                Mark Takano, California
Glenn Grothman, Wisconsin            Hakeem S. Jeffries, New York
Rick Allen, Georgia
                            
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on August 25, 2015..................................     1

Statement of Members:
    Bradley, Hon. Bradley, a Representative in Congress from the 
      state of Alabama...........................................     3
        Prepared statement of....................................     5
    Roe, Hon. David P., Chairman, Subcommittee on Health, 
      Employment, Labor, and Pensions............................     1
        Prepared statement of....................................     2

Statement of Witnesses:
    Carey, Colonel Steve, (USAF, RET.), Owner/Operator, CertaPro 
      Painters of Mobile and Baldwin Counties, Daphne, AL........    15
        Prepared statement of....................................    18
    Debruge, Mr. Marcel L., Labor Attorney, Burr & Forman LLP, 
      Birmingham, AL.............................................     6
        Prepared statement of....................................     9
    Holmes, Mr. Chris, Area Representative, Firehouse Subs, and 
      CEO, CLH Development Holdings, Inc., Tallahassee, FL.......    23
        Prepared statement of....................................    25

 
                  REDEFINING `EMPLOYER' AND THE IMPACT
                        ON ALABAMA'S WORKERS AND
                         SMALL BUSINESS OWNERS

                              ----------                              


                        Tuesday, August 25, 2015

                        House of Representatives

                            Subcommittee on

                Health, Employment, Labor, and Pensions

                Committee on Education and the Workforce

                            Washington, D.C.

                              ----------                              

    The Subcommittee met, pursuant to call, at 10:02 a.m., at 
the University of South Alabama, Alabama Student Center 
Ballroom, 350 Campus Drive, Mobile, Alabama, David P. Roe 
[chairman of the subcommittee] presiding.
    Present: Representatives Roe and Byrne.
    Staff present: Janelle Belland, Coalitions and Members 
Services Coordinator; Christie Herman, Professional Staff 
Member; Tyler Hernandez, Press Secretary; John Martin, 
Professional Staff Member; and Eunice Ikene, Minority Labor 
Policy Associate.
    Chairman Roe. A quorum being present, the Subcommittee on 
Health, Employment, Labor, and Pensions will come to order. I 
first would like to recognize myself for opening remarks, this 
morning.
    Good morning, everyone. We welcome today's hearing. I first 
would like to take a moment to thank our witnesses for joining 
us. I would also like to thank the staff here at the University 
of South Alabama for their hospitality, and also to our 
security that is here today. Thank you for being here.
    I am happy to be here, and I am thankful for the 
opportunity to get out of Washington and to hear directly from 
you about an issue that could have significant consequences for 
a lot of people in Alabama and across this country. That issue 
is an effort by a handful of unelected bureaucrats in 
Washington who are trying to fundamentally change the way 
franchise businesses operate.
    This is a complicated issue, and before I get into what the 
Board is trying to do, I want to say a little bit about what is 
at stake. More than 780,000 franchise businesses currently 
operate in the United States, employing nearly 9 million 
workers. These small businesses, which are independently owned 
and operated, have helped create jobs and allowed countless 
individuals to realize the dream of owning their own business. 
Franchise businesses are vital to countless communities and 
working families.
    A federal agency known as the National Labor Relations 
Board is trying to upend the franchise model by changing what 
it means to be an employer. The NLRB's general counsel is 
pushing the Agency to blur the lines of responsibility between 
a franchisee--that is the person who owns and operates the 
business locally--and the franchisor--the entity that enables a 
small business owner to use an established brand to sell 
certain goods or services in a particular area.
    This effort would make both ``joint employers'' and give 
them equal responsibility for decisions affecting the day-to-
day operations of the business: decisions like hiring, 
training, wages, and work schedules. What will this look like 
in the real world?
    For starters, these small business owners, these 
franchisees, will have less freedom to operate their own 
businesses. If a franchisor is suddenly responsible for 
decisions affecting employees at each individual franchise, 
they will naturally assert more control over those decisions. 
That just makes common sense. More control for the franchisor, 
of course, means less control for the franchisee--the local 
business owner. And suddenly that small business owner is no 
longer making decisions about the way his or her business is 
run. Individuals like Mr. Holmes and Colonel Carey, who have 
worked hard to start their own businesses, may no longer decide 
who their employees are, when they work, how they are trained, 
hours they work.
    But the consequences of expanding the joint employer 
standard are not just operational. Such a move will also lead 
to higher consumer costs, fewer small businesses, lost jobs, 
more litigation, fewer opportunities for individuals to pursue 
the American Dream, just the opposite of what we need to be 
doing in this country right now.
    To make matters worse, the NLRB might extend this flawed 
approach to businesses outside the franchise industry, like 
contractors and subcontractors. A change like that would 
disrupt countless businesses here in Mobile and all along the 
Gulf Coast and across this country. It is not easy starting a 
small business, let alone keeping a small business afloat in 
this economy.
    The last thing we need is an unelected and unaccountable 
board of bureaucrats to make it more difficult to pursue the 
American Dream. By sharing your stories and concerns today, you 
are helping us to fight back against this misguided scheme and 
ensure policies are in place that promote, instead of 
discourage, economic growth and development.
    I want to thank our witnesses again for being here today 
and sharing their personal experiences with the Committee. I 
look forward to hearing from each of you.

  Prepared Statement of Hon. David P. Roe, Chairman, Subcommittee on 
                Health, Employment, Labor, and Pensions

    Good morning, everyone, and welcome to today's hearing. I'd first 
like to take a moment to thank our witnesses for joining us. I would 
also like to thank the staff here at the University of South Alabama 
for their hospitality.
    I'm happy to be here and thankful for the opportunity to get out of 
Washington and hear directly from all of you about an issue that could 
have significant consequences for a lot of people in Alabama and across 
the country. That issue is an effort by a handful of unelected 
bureaucrats in Washington that are trying to fundamentally change the 
way franchise businesses operate.
    This is a complicated issue, but before I get into what the board 
is trying to do, I want to say a little bit about what's at stake. More 
than 780,000 franchise businesses currently operate in the United 
States, employing nearly nine million workers. These small businesses, 
which are independently owned and managed, have helped create jobs and 
have allowed countless individuals to realize the dream of owning a 
business. Franchise businesses are vital to countless communities and 
working families.
    A federal agency, known as the National Labor Relations Board, is 
trying to upend the franchise model by changing what it means to be an 
employer. The NLRB's general counsel is pushing the agency to blur the 
lines of responsibility between a franchisee - the person who owns and 
operates the business locally - and a franchisor - the entity that 
enables the small business owner to use an established brand to sell 
certain goods or services in a particular area. This effort would make 
both ``joint employers'' and give them equal responsibility for 
decisions affecting the day-to-day operations of the business - 
decisions like hiring, training, wages, and work schedules. What would 
this look like in the real world?
    For starters, these small business owners, these franchisees, will 
have less freedom to operate their own businesses. If a franchisor is 
suddenly responsible for decisions affecting employees at each 
individual franchise, they will naturally assert more control over 
those decisions. More control for the franchisor, of course, means less 
control for the franchisee, and suddenly, that small business owner is 
no longer making decisions about the way his or her business is run. 
Individuals like Colonel Carey and Mr. Holmes who have worked hard to 
start their own businesses may no longer decide who their employees 
are, when they work, and how they are trained.
    But the consequences of expanding the joint employer standard 
aren't just operational. Such a move will also lead to higher consumer 
costs, fewer small businesses, lost jobs, more litigation, and fewer 
opportunities for individuals to pursue the American Dream. To make 
matters worse, the NLRB might extend this flawed approach to businesses 
outside the franchise industry, like contractors and subcontractors. A 
change like that would disrupt countless businesses here in Mobile, all 
along the Gulf Coast, and across the country.
    It's not easy starting a small business, let alone keeping a small 
business afloat in this economy. The last thing we need is for an 
unelected and unaccountable board of bureaucrats to make it more 
difficult to pursue the American Dream. By sharing your stories and 
concerns today, you are helping us to fight back against this misguided 
scheme and ensure policies are in place that promote - instead of 
discourage - economic growth and job creation.
    I want to thank our witnesses again for being with us today and 
sharing their personal experiences with the committee. I look forward 
to hearing from each of you, so I'm going to yield to my distinguished 
colleague and our host today, Congressman Bradley Byrne, for his 
opening remarks.
                                 ______
                                 
    I will now take this opportunity to recognize our host 
today, Congressman Byrne, for his opening remarks.
    Mr. Byrne. Thank you, Mr. Chairman. I am pleased to welcome 
you and our witnesses to Alabama's 1st Congressional District 
to speak about the importance of the NLRB's interpretation of 
``joint employer,'' which will impact, as you said, thousands 
of business owners and their employees in my district and 
throughout the country.
    I will say, Mr. Chairman, I know that you are a physician 
by training and background, but as a former labor and 
employment attorney after watching you the last year and a half 
on this subcommittee, I think you missed your calling. You 
could be a labor and employment attorney. You have mastered 
these issues wonderfully. And I really appreciate the extent to 
which you have poured yourself into understanding not just the 
technical application, but the real world experience that we 
have here.
    I also want to welcome and thank the committee staff. I 
know you all have worked very hard to make this work. You are 
outside of Washington, so thank you for doing that. And, of 
course, the University of South Alabama, I could not be prouder 
of this university. This is my university. It is in my 
district, and you all have done a great job today.
    I want to thank our witnesses, two of whom I know very 
well. I appreciate you being here. We have a gentleman who has 
driven a long way from Tallahassee to be here. I know how long 
that road is on I-10. Thank you for coming.
    Mr. Holmes. My pleasure.
    Mr. Byrne. And we want to thank all the members of the 
public for being here.
    Committee hearings have always provided transparency and a 
way for the public to hear their representatives debate 
important issues. Field hearings, however, provide a much more 
tangible way for our constituents, like the people of South 
Alabama, to be directly involved in the process. Issues like 
the NLRB's definition of a ``joint employer'' under national 
labor law affects Main Street businesses in a real way, and it 
is imperative for Congress to come directly to the people to 
discuss the impact these decisions will have on their everyday 
lives.
    As Chairman Roe explained, the NLRB is tasked with 
determining whether two businesses may be considered joint 
employers under the National Labor Relations Act. This 
definition is then used by the NLRB to mediate labor disputes 
and to determine the rights and protections afforded to 
employees under national labor laws.
    We, as a committee, have discussed joint employer status 
before in the Browning-Ferris v. NLRB case. It was during that 
discussion that the franchise-joint employer relationship was 
brought up. Now, as a former management attorney who has worked 
in this field for over 30 years, it truly boggles my mind that 
we are even talking about redefining the joint employer 
relationship in the franchise industry.
    The franchise model's way of doing business has been around 
for decades, and it represents a win-win for franchisors, 
franchisees, and, most importantly, franchisee employees. 
Franchisees get the gratification of charting their own course, 
owning their own business, while franchisors benefit from the 
licensing of their product. As a franchise expands, more 
opportunities are created for both the employees of the 
franchise and for the franchisee.
    During our last hearing, my colleagues on the other side of 
the aisle could not understand why the franchise industry was 
worried about their status as independent business owners and 
why franchisors were worried about what this would do to their 
business model. The answer is simple: expanding the definition 
of ``joint employer'' increases the liability of doing 
business. It changes the franchisor/franchisee relationship. It 
disrupts the flow of commerce and puts long-term job growth in 
jeopardy. These proposed changes will directly impact products 
and services that people have come to depend on across the 
United States.
    I look forward to hearing from our witnesses about the 
impacts this change will have for business owners and their 
employees. Thank you, Mr. Chairman, and once again we welcome 
everybody to the 1st District of Alabama.

Prepared Statement of Hon. Bradley Byrne, a Representative in Congress 
                       from the state of Alabama

    I am pleased to welcome Chairman Roe and our witnesses to Alabama's 
First Congressional District to speak about the importance of the 
National Labor Relations Board's interpretation of a ``joint 
employer'', which will impact thousands of business owners and their 
employees in my district and throughout the country.
    I would like to thank Chairman Roe, Committee Staff, the University 
of South Alabama, as well as our witnesses and members of the public 
here today for being a part of this hearing.
    Committee hearings have always provided transparency and a way for 
the public to hear their Representatives debate important issues. Field 
hearings, however, provide a much more tangible way for our 
constituents, like the people of South Alabama, to be directly involved 
in the process.
    Issues like the National Labor Relations Board's definition of a 
``joint employer'' under national labor law affect Main Street 
businesses in a real way and it is imperative for Congress to come 
directly to the people to discuss the impact these decisions will have 
on their everyday lives.
    As Chairman Roe explained, the NLRB is tasked with determining 
whether two businesses may be considered ``joint employers'' under the 
National Labor Relations Act. This definition is then used by the NLRB 
to mediate labor disputes and to determine the rights and protections 
afforded to employees under national labor laws.
    We as a Committee have discussed joint employer status before in 
the Browning Ferris v. NLRB case, and it was during that discussion 
that the franchise joint employer relationship was brought up. Now as a 
former management attorney who has worked in the field for 30 years, it 
truly boggles my mind that we are even talking about redefining a joint 
employer relationship in the franchise industry.
    The franchise model, as a way of doing business, has been around 
for decades and represents a win-win for franchisors, franchisees, and 
franchise employees. Franchisees get the gratification of charting 
their own course and owning their own business while franchisors 
benefit from the licensing of their product. As the franchise expands, 
more
    opportunities are created for both the employees of the franchise 
and for the franchisee.
    During our last hearing, my colleagues on the other side of the 
aisle couldn't understand why the franchise industry was worried about 
their status as independent business owners and why franchisors were 
worried about what this would do to their business model. The answer is 
simple - expanding the definition of ``joint employer'' increases the 
liability of doing business, changes the franchisor-franchisee 
relationship, disrupts the flow of commerce, and puts long-term job 
growth in jeopardy.
    These proposed changes will directly impact products and services 
that people have come to depend on across the United States. I look 
forward to hearing from our witnesses about the impacts this change 
will have for business owners and their employees.
                                 ______
                                 
    Chairman Roe. Thank you very much for yielding. And 
pursuant to Committee Rule 7(c), all subcommittee members will 
be permitted to submit written statements to be included in the 
permanent hearing record. And without objection, the hearing 
record will remain open for 14 days to allow statements, 
questions for the record, and other extraneous materials 
referenced during the hearing to be submitted into the official 
hearing record.
    It is now my distinct pleasure to introduce our 
distinguished witnesses. First, Mr. Marcel Debruge is Chair of 
the Labor and Employment Practice Group at Burr & Forman LLP in 
Birmingham, Alabama. He focuses his practice on representing 
management in all aspects of labor and employment law, 
including litigation before Federal and State courts and 
administrative agencies. Welcome, Mr. Debruge.
    Colonel Steve Carey owns and operates CertaPro Painters of 
Mobile and Baldwin Counties in Daphne, Alabama, an interior and 
exterior house painting contractor, which has won an A-plus 
rating from the Better Business Bureau. Colonel Carey, retired, 
is a Commandant at the College of Aerospace Doctrine Research 
and Education, and the Vice Commander at Air Force Doctrine 
Center, Air University, Maxwell Air Force Base, Alabama. Sir, 
thank you for your service to our great Nation.
    And Mr. Chris Holmes is CEO of CLH Development, Inc. of 
Tallahassee, Florida, since its incorporation in 2001. Mr. 
Holmes is an area representative for Firehouse Subs in 
Southeast Alabama, South Georgia, and North Florida. He has 
sold the rights to five Firehouse Sub restaurants in Southeast 
Alabama, 15 Firehouse Sub restaurants in South Georgia, and 10 
Firehouse Sub restaurants in North Florida. Mr. Holmes also 
owns and operates one Firehouse Sub restaurant in Tallahassee, 
Florida.
    And I might add for the record that we did invite members 
from both sides of the aisle to be here, both Democrats and 
Republicans. Democratic witnesses were also invited, but 
declined.
    Gentlemen, I will now ask you to stand and raise your right 
hand.
    Do you solemnly swear or affirm that the testimony you are 
about to give will be the truth, the whole truth, and nothing 
but the truth?
    [A chorus of ayes.]
    Chairman Roe. Let the record reflect the witnesses answered 
in the affirmative, and you may take your seat. Before I 
recognize you for your testimony, let me briefly explain our 
lighting system. You have five minutes to present your 
testimony. When you begin, the light in front of you will turn 
green. With one minute left it will turn amber, and when your 
time has expired, the light will turn red. And at that point I 
will ask you to wrap up your remarks. I will not certainly cut 
you off mid-sentence. Each member will also be given five 
minutes, and we will probably have more than one round of 
questioning.
    And just before, Mr. Debruge, you are recognized, this is 
an official hearing of the United States Congress. And one of 
the things I like about field hearings is it does something I 
wish we would do more often, which is to bring the Congress to 
the people, which is what we are doing here, as opposed to the 
people going to the Congress. This is the people's House, the 
House of Representatives, and we are here to learn what is on 
your mind.
    And, again, Mr. Debruge, you are recognized for five 
minutes.

 TESTIMONY OF MARCEL L. DEBRUGE, LABOR ATTORNEY, BURR & FORMAN 
                    LLP, BIRMINGHAM, ALABAMA

    Mr. Debruge. Thank you, Chairman Roe, Congressman Byrne. My 
name is Marcel Debruge, and I am a partner at Burr & Forman LLP 
in Birmingham, Alabama, and have been practicing labor and 
employment law since 1991. For many years, my practice has 
focused on representing clients in the manufacturing sector, 
primarily in the State of Alabama, but also throughout the 
United States. I represent dozens of manufacturing operations 
in our State, which employ tens of thousands of Alabamians, and 
I have personally visited the vast majority of major Alabama 
manufacturing operations.
    Our State has had a resurgence of manufacturing jobs in the 
past 25 years. By the mid-1990s, Alabama had seen the decline 
of its older unionized industries, such as steel, textiles, 
chemicals, and paper. Our State understood that it had to 
attract new business to create manufacturing jobs for people 
with a high school education, and limited work experience and 
job skills.
    Our State, like many other States in the Southeast, 
therefore invested heavily to recruit global automotive, steel, 
and aerospace companies, among many others. In many cases, 
these marquee companies have attracted dozens of suppliers who 
build factories in Alabama as well. The numbers tell the story.
    In 1993, not a single automobile was made in Alabama. Today 
Alabama employs over 35,000 men and women in automotive 
manufacturing, and has produced more than 8.2 million cars and 
light trucks. Alabama earns the number two spot on Business 
Facilities Magazine's Annual State Automotive Manufacturing 
Strength Ranking. This ranking emphasizes growth potential as 
well as production figures and industry trends.
    Alabama ranks fifth in the U.S. in car and light truck 
production. Alabama auto makers produced more than 918,000 cars 
and light trucks in 2013. Ten passenger vehicle models are 
built by Alabama manufacturers. Alabama's export dollars for 
vehicles and vehicle parts totaled nearly $7.1 billion for 
2013. And finally, 1/4th of all passenger vehicles built in the 
South are made in Alabama.
    Alabama's political leaders, both Republican and 
Democratic, recognized that the old way of doing business was 
not working, so they put the State's resources behind the 
recruitment of these new manufacturing jobs. Unlike in the old 
days, these post-1990s manufacturing jobs are primarily, but 
certainly not exclusively, in plants that are foreign owned, 
union free, and staffed with a variety of categories of 
employees, such as regular full-time, regular part-time, 
temporary, and contract labor.
    These new plants are modern, efficient, safe, clean, 
flexible, and capable of achieving the highest quality in the 
world. They pay competitive wages based on the nature of the 
business and the location of each facility. Controlling costs 
is vital to their survival because they are forced to compete 
with overseas operations in Mexico, Central America, and China. 
For example, automotive supplier wages in Mexico are between $1 
and $2 per hour. These same types of supplier plants in Alabama 
pay 10 to 20 times more than those Mexican wages.
    On March 17, 2015, in the Wall Street Journal, an article 
appeared titled, ``Why Automakers are Building New Factories in 
Mexico, Not the U.S.'' And that article states: ``It has been 
more than six years since an automaker picked the U.S. South 
for a green field plant, meaning one where the company did not 
already have facilities. Such projects have all gone to Mexico 
lately.'' Flexibility is critical to Alabama's manufacturing 
facilities. It means having the right number of trained workers 
and being able to classify those workers in a way that makes 
economic sense.
    In my experience, most companies rely on a mix of regular, 
temporary, and contract labor to operate. It is common to see a 
facility utilize regular full-time associates, regular part-
time associates, temporary associates, and on-site contractors 
handling tasks such as shipping and receiving, sorting, quality 
control, maintenance, and logistics.
    A one-size-fits-all approach in which virtually everyone is 
performing some task on site as either an employee or a joint 
employee is simply not realistic, and, in my judgment, one, 
will cause fewer new plants to locate here, two, will put at 
risk the jobs we currently have, three, will discourage 
existing companies from expanding in the U.S., and, four, will 
give foreign manufacturing operations an even bigger cost 
advantage than they already have.
    Expanding the definition of ``joint employer'' and then 
forcing these newly-defined joint employers to negotiate 
together with a bargaining unit comprised of people who work 
for different employers is not the way to promote flexibility, 
contain costs, and increase competitiveness. It will result in 
more litigation, more labor unrest, more strikes, more 
picketing, more union organizing drives, and ultimately fewer 
jobs.
    Thank you.
    [The statement of Mr. Debruge follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Chairman Roe. Thank you. Colonel Carey, you are recognized 
for five minutes.

TESTIMONY OF COLONEL STEVE CAREY (USAF, RET.), OWNER/OPERATOR, 
   CERTAPRO PAINTERS OF MOBILE AND BALDWIN COUNTIES, DAPHNE, 
                            ALABAMA

    Mr. Carey. Yes, sir. Chairman Roe, Congressman Byrne, 
distinguished members, it really is a pleasure to be here and 
testify before you today. I am the owner of CertaPro Painters 
of Mobile and Baldwin Counties. We are a licensed, bonded, and 
insured residential and commercial painting company.
    I appear before you on behalf of the Coalition to Save 
Local Businesses and the International Franchise Association. 
I, like my fellow witnesses here, am extremely troubled about 
the National Labor Relations Board's expanded application of 
``joint employer,'' and the very real threat to my business 
that a new joint employer standard brings.
    As a small business owner, entrepreneur, and franchisee, I 
believe that the NLRB is doing Congress' job in making a new 
law by inventing a new definition. This new standard seems to 
ignore all the precedent in federal labor law and threatens the 
livelihoods of small business owners like myself.
    As background, the Coalition to Save Local Businesses is a 
diverse group of locally owned and independent small 
businesses, associations, and organizations. This group is 
dedicated to protecting and strengthening all sectors of small 
business, which are now under attack by the NLRB.
    My wife, Charlotte, and my three children, Clark, Camille, 
and John Charles, and I moved to Mobile seven years ago after I 
retired from my short 30-year career in the Air Force. I am a 
combat veteran, flew F-15s and F-16s, squadron commander, 
instructor pilot, and mission commander. My leadership position 
was at Maxwell Air Force Base at the College of Doctrine and 
Research.
    When I retired, I wanted to settle near a close-knit 
community. I had drug my wife around the world for some 15 
years, and she said, ``We are going back to Alabama.'' So we 
settled down here, and I decided to start a career as a small 
businessman. I transitioned to a successful career in 
franchising. I want to highlight the fact that the 
International Franchise Association's VetFran initiative has 
been very helpful to veterans like myself. In fact, over 75,000 
veterans and their spouses have become franchise business 
owners and employees in various franchise industries.
    During my Air Force career, I developed the characteristics 
and honed the skills necessary to run what I consider a world-
class organization. I transferred those skills into my second 
life as a small businessman and franchisee. The skills include 
things like leadership, professionalism, integrity, and 
attention to detail. That is how I could walk away with an A-
plus rating from the Better Business Bureau, how I can put my 
face on the side of my truck and tell people I bring certainty 
and integrity into your home. I generated a brand for the 
painting industry in southern Alabama that is unmatched, and I 
am proud of that. And I can look back at my Air Force career 
and say a lot of the things I learned in terms of leading men 
and women have carried through to me now as a small 
businessman.
    Locally, I serve on the executive board for two chambers, 
Eastern Shore and Mobile. I am director of the Foundation for 
Workforce Development, and vice chair of a student group called 
the Student Training and Exploration Program. I also serve in 
Mobile as the vice chair for Military Affairs where I help 
build public awareness and promote veteran issues with local 
businesses, hosting a military appreciation luncheon at our 
local USS Alabama battleship. I was recently selected to serve 
on the Alabama Red Cross Board of Directors, and I now have a 
state appointment to the Alabama Aviation Hall of Fame 
Directors Board.
    I am a strong supporter of education for our youth, and as 
president of our South Alabama Air Force Association, we go a 
long way to improve science, technology, engineering, and math 
for our young men and women, and that carries right through 
here to our Air Force ROTC detachments at the University of 
South Alabama.
    I was asked why did my wife and I pursue a career in 
franchising. When I retired from the Air Force, we spent a lot 
of time deciding what would be best for my family. I had a 
business bug. I had an MBA. We explored the idea of purchasing 
an existing business and considered both independent businesses 
and franchises themselves. We decided that the franchise 
opportunity would be the best fit for our family because it 
allowed me to run an independent business, but still be able to 
work with a proven brand and a solid business model.
    I purchased CertaPro Painters as a franchise in 2008, 
probably not the best time in the course of business history to 
buy a franchise. But immediately I was profitable and ran a 
smart, lean, good business operation. It was a good fit for me 
because it was a service business based on working with people, 
and getting out of the office, and spending time with 
homeowners as well as commercial clients that had a particular 
need.
    CertaPro offers a 10 percent discount to all franchisees 
that are veterans like myself, and when I decided to buy that 
franchise, they put out their hand and said we thank you for 
your service, we want you to be part of our team. And that is 
exactly what I felt like when I joined and bought my franchise 
from CertaPro.
    The agreement, in my view, is fairly simple. It is pretty 
thin, but it is very detailed and very precise. What they do is 
they help me with brand materials, including trademarks and 
logos, estimating and project management tools, software, and 
some marketing. But in all other aspects, I operate as an 
independent stand alone business, just like any non-franchise 
small business owner. I have the autonomy to run my business as 
I see fit. I make the decisions every day, and that is what I 
bought into, not to be told what to do.
    Much like my time as a commander in the military when I 
sent young men out flying F-15s or F-16s in harm's way, I did 
not expect myself to sit back at the headquarters there and 
pass to them decisions and make radio calls that they would 
then have to act on. I wanted them to be independent. That is 
the way I operate my business. I want to be independent. I want 
to lead my business, make decisions, and grow my business so 
that I have a legacy for myself and for my family.
    Small businesses like mine play a valuable role in our 
community, not only in opportunities, but also in the growth of 
the local economy. We provide entrepreneurial opportunities for 
people looking to create new jobs and grow. Small business is 
bracing for the NLRB's decision for the forthcoming Browning-
Ferris case, a decision that some expect may come as early as 
next week. I am not a lawyer, but there appears to be little 
suspense about where the NLRB is headed, and I want to be sure 
that we make the right decisions.
    Fortunately, after I retired from the Air Force, the 
opportunity for small business presented itself with the 
franchise of CertaPro Painters. I probably would not have 
signed up to take on the work and the hard dedication it takes 
to run a business had I been handcuffed with a change in 
definitions.
    Mr. Chairman, I strongly urge this committee to consider 
the devastating impact on small business owners that this may 
have. I ask you to do what Congress can to ensure that the NLRB 
cannot take away the livelihoods of small business owners like 
myself.
    I thank you for this opportunity.
    [The statement of Colonel Carey follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Chairman Roe. Thank you, Mr. Carey.
    Mr. Holmes, you are recognized for five minutes.

TESTIMONY OF CHRIS HOLMES, AREA REPRESENTATIVE, FIREHOUSE SUBS, 
 AND CEO, CLH DEVELOPMENT HOLDINGS, INC., TALLAHASSEE, FLORIDA

    Mr. Holmes. Thank you. Chairman Roe, Congressman Byrne, 
thank you for the opportunity to testify before you today. My 
name is Chris Holmes. I am the area representative for 
Firehouse Subs in Northern Florida, South Georgia, and 
Southeast Alabama. I currently own and operate one Firehouse 
Subs restaurant in Tallahassee, Florida, and led the 
development of 30 other Firehouse Subs restaurants in this 
region of the country.
    I am here today to discuss my concerns regarding the 
National Labor Relations Board's attempt to expand the 
definition of what constitutes a joint employer, and the very 
real threat of that effort to not only my business, but 
thousands of small businesses like mine throughout the country.
    Changing the definition will have a significant impact on 
another definition as well, the definition of the American 
Dream. As a small business owner and an entrepreneur who 
started off my career as a 16-year-old kid working at a local 
McDonald's, I embody that definition every day. From the first 
job, I pursued a career in the restaurant business, working my 
way up the ladder of the industry from dishwasher, to manager, 
to district manager, and now to a business owner, who has the 
privilege of testifying before the United States Congress. What 
an amazing journey, but yet at the same time, what a typically 
American one.
    I am here today because I believe that dream may be in 
jeopardy. Our story is not unlike millions of other small 
business owners. My wife and I decided that after numerous 
roles in the industry, we wanted the independence of owning and 
operating our own small business and the ability to take 
control of our family's financial future. As we looked for 
those opportunities, we became associated with Firehouse Subs, 
and for the first time were exposed to the franchise business 
model.
    For us, this was the perfect scenario. We could run our own 
independent business, while at the same time participating with 
an exciting and growing brand that customers clearly loved. The 
ability to franchise was our entry point into small business 
ownership. So we did what so many other entrepreneurs have 
done. We took out second mortgages. We sold everything that was 
not nailed down. We maxed out credit cards and even borrowed 
money from our parents. The franchise model opened the door for 
ourselves and millions of others just like us to pursue small 
business ownership. Without it, we would never have been able 
to realize the dream.
    Franchising is an often misunderstood, but actually a very 
simple and effective model. My arrangement with Firehouse of 
America is very straightforward. They provide the brand 
materials, including the trademarks and logos, recipes, 
significant marketing support, and countless other resources to 
maintain consistency across the brand. But in all other 
respects, I operate as an independent stand-alone business, 
just like a non-franchise small business owner would.
    I have the autonomy to run my business as I see fit, 
including on matters such as staffing, labor costs, vendor 
relationships, among others. I do all the hiring, all the 
firing, and I set the wage rates for my business. Firehouse of 
America has no role in this. It is my business.
    I believe, however, the new joint employer standard, if 
allowed to go forward, will irrevocably change that model. If 
the larger franchisor is now liable for the employment 
decisions of their service providers, franchisees, or other 
contractors, then they would have no choice but to be 
completely involved in those decision making processes. I will 
have lost my autonomy, my independence, and potentially my 
investment.
    Instead of being a small businessman, I would become 
virtually overnight a manager for a large company. While I have 
played that role before and certainly do not begrudge that, it 
is not what I aspire to. I took the risk to start and run a 
small business, but now I find myself in the position of 
potentially having an unelected board in Washington, D.C., just 
unilaterally determine that my American Dream is over. Could 
that really be possible?
    For us, our business has been the site of a family reunion 
that has lasted close to 20 years, where our children, our 
brothers and sisters, our nieces and nephews, and even our 
parents have all worked in the restaurant, collectively 
building the security of multiple generations of our household. 
And it is a place where the careers of hundreds of young people 
began their own journeys that would have never happened if it 
were not our business and our opportunity to pursue our dream.
    While it is quite clear that the NLRB wants to negatively 
impact the business model of some of America's largest 
companies through this action, it is ironic that what they will 
actually be doing is hurting America's smallest businesses. The 
real effect will be small franchisee operators essentially 
losing their business to an often larger franchisor, making the 
large company larger and the franchisee extinct. If your goal 
is to push small business operators to the curb and stifle 
investment into new startup businesses, you could not come up 
with a more effective tool than this joint employer decision.
    Mr. Chairman, Congressman Byrne, it is my hope that you and 
your committee will do everything in your power to ensure that 
the NLRB is not able to finalize this decision. My small 
business and the security of my family are riding on it. Thank 
you again for the opportunity to share my concerns with you.
    [The statement of Mr. Holmes follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Chairman Roe. Mr. Holmes, thank you very much. I will now 
recognize myself for five minutes. And, Mr. Holmes, when I was 
16, actually 15, at a scout camp, I washed 350 dishes three 
times a day, and I determined that I did not want to be in the 
restaurant business after that summer--
    [Laughter.]
    Mr. Holmes. I understand.
    Chairman Roe.--for the rest of my life, although I did 
spend the next six years running the dining hall, but I got 
that all out of my system as a young person.
    I think the three of your testimonies have really made me 
angry because what I hear is I hear people who went out, took 
the risk, and invested their life savings into a business now 
to maybe have it taken away from them by not five, but three 
unelected bureaucrats in Washington, D.C., who think they know 
better about how to run your business than you do.
    And my question is to you all to start with, what do you 
all see, and maybe, Mr. Debruge, you could start this. What is 
the motivation of the NLRB because their purpose, I mean, it is 
very simply, clearly written what their purpose is. And I 
always thought, you know, I am an old basketball player, and I 
thought when I went on the court there were a set of referees 
out there that gave their best estimate about what the rules 
are. You knew what they were, and you played by them. This NLRB 
is not doing that, and they have definitely shifted it in favor 
of the unions. And I just wonder what you think their 
motivation is. It cannot be to help these gentlemen right here 
because they clearly said it is not helping them.
    Mr. Debruge. Well, from my perspective, the motivation is 
pretty obvious: it is to increase the number of people who pay 
union dues. The current leadership, the current board, is 
focused almost exclusively on how to expand union membership in 
the private sector. Today, since World War II, unions have 
dropped from roughly 40 percent of the private sector workforce 
to--I think the number is--6.6 percent today. They are almost 
an afterthought in most industries, especially anything built 
in the last 25, 30 years.
    The Wagner Act was enacted in 1935. It was not really 
amended in any meaningful way until 1947 with Taft-Hartley, and 
it has kind of stayed the same since then. It is outdated, it 
is outmoded, and it adheres to a 1930s model, a New Deal model 
that collective bargaining is the way to ensure economic 
stability, a safe, fair workplace for workers, and rights on 
the shop floor. That model no longer applies in the 21st 
Century in the global economy. The National Labor Relations Act 
is completely outmoded when it comes to the vast majority of 
industries today in this country, especially manufacturing.
    So the NLRB's focus has become incredibly politicized. It 
has almost dropped any pretense of being an arbiter or a 
referee, Mr. Chairman, as you put it. And the goal simply is to 
find ways to expand union coverage to increase that 6.6 number, 
and by expanding the definition ``joint employeer,'' and then 
requiring multi-employer bargaining units, which to me is truly 
disturbing. Everything we have heard is disturbing, but the 
thought of taking all these newly-created joint employees, 
cramming them into a single bargaining unit, and requiring 
bargaining with multiple employers who do not agree to it, I 
think is a recipe for disaster and inefficiency, and it is 
going to kill jobs.
    Chairman Roe. I think one of the things in the joint 
employer model that they are looking at was just rebutted by 
both Colonel Carey and Mr. Holmes. And I heard Mr. Holmes say 
very clearly, as clear as I can understand it, I run my own 
business as I see fit. I think that is what he said. Certainly 
you have logos, and models, and business models out there to 
help you promote your business, but you run your business, and 
what they are saying now--I totally agree.
    And the example I use is as a medical office, as a private 
small business owner, we contracted out our janitorial 
services. We did not do that, but every day we had certain 
standards in our office, but they did not work for me. And if 
they were not doing the job, I asked them to get people who did 
do the job. Did that mean I was the employer? Well, under this 
NLRB, the answer would be yes. I would be the employer. It is 
ridiculous. I was not the employer. We bid that contract out 
every year or two, and I am sure you do the same thing with 
many things you do, bid out.
    So would you just again for the record talk about, and 
Colonel Carey, if you would, about how this would affect your 
business. If you no longer had day-to-day control over the 
people, because I heard you say you very much prided yourself 
in going into homes, taking the expertise that you had learned 
as a military officer for 30 years, and put that in the 
business world. How would that affect how you run your 
business?
    Mr. Carey. Sir, before I answer that, just another add-on 
here from a subtle standpoint with what the situation presents 
is, in my view this is about control, control at a higher level 
versus at a lower level, ``lower level'' meaning the small 
businessman. My time in the military, and I will use this as 
kind of an analogy. Our Air Force is the greatest air force in 
the world. It even is today. The reason it is, is because we 
have autonomy in the cockpits of the young men and women that 
fly out and have their missions.
    In the Soviet Union that was not the case. The autonomy did 
not exist. Those young men and women in the Soviet aircraft, 
they were completely controlled by the senior officers sitting 
on the ground. That is the same situation just in a business 
perspective that we face here is that we are moving the power 
and decision making up to a higher corporate level, which then 
disables businessmen and even the employees underneath to be 
independent, to have the initiative that they need to run a 
good business, and to really create some style and character as 
a local businessman.
    To answer your question, though, when you talk about the 
impact on me is, you know, I have a great deal of pride when I 
walk into those homes. I love it when I walk into a store and 
somebody goes, ``Hi, Steve.'' And maybe it is a homeowner that 
I met three or four years ago, but they recognize me not as 
CertaPro, but as a local businessman. That independence, that 
sense that I am a small local business owner would disappear if 
I became just a puppet or somebody that was mimicking a lot of 
what I was told to do.
    And I take a great deal of pride in being able to shape my 
business because from a franchisee standpoint in the case of 
CertaPro, there are 350 of us out there. All of us run 
dramatically different businesses. How I run my business in 
Mobile, Alabama, is not the same as Philly, not the same as San 
Francisco, not the same as the middle of Kansas. I tailor it to 
my market, and it is the decisions and risks that I take as a 
business owner because I am at that level, I am in the weeds.
    If that is taken away from me, if I am told what to do, how 
to act, and how to respond, then I am probably going to lose 
the desire and the initiative to really run my business and 
work as hard as I do. And that is what I signed up for. I tell 
many folks now that I work harder now as a small businessman 
than I did as a colonel commanding hundreds of men.
    Chairman Roe. I believe that.
    Mr. Carey. And it is an 8-day-a-week job.
    Chairman Roe. My time has expired. Mr. Byrne, you are 
recognized.
    Mr. Byrne. Thank you, Mr. Chairman. Colonel Carey, how many 
people do you employ in your business?
    Mr. Carey. I have three employees, but I use mostly 
subcontractors.
    Mr. Byrne. And how many subcontractors on average?
    Mr. Carey. Seasonally on average I would probably say 
individually probably in the 30 range.
    Mr. Byrne. Okay. And, Mr. Holmes, how many people do you 
employ in your restaurant?
    Mr. Holmes. In the one restaurant that I own and operate, 
we have approximately 20 people.
    Mr. Byrne. Okay. So what we do is we take your small 
businesses and we multiply that by hundreds of thousands of 
similar businesses.
    Chairman Roe. Mr. Byrne, when you all answer the questions 
for the questions, could you all speak a little more directly 
into the microphone, bring them up a little closer to you?
    Mr. Byrne. When you multiply those numbers of employees, 
subcontractors included, by hundreds of thousands of 
businesses, you see an enormous impact on the American economy. 
You are creating millions of jobs, and sometimes we get lost 
when we look at the big employers, and I am all for employment 
at whatever level. But you are creating millions of jobs for 
people that probably would not have them without you.
    Not only that, Colonel Carey, I know what you are doing in 
our community. You get hit up all the time for providing this 
or that and contributing this or that, and you do it because 
you want to be a part of your community. Mr. Holmes, I am sure 
you are doing the same thing in Tallahassee.
    Mr. Holmes. Yes, sir.
    Mr. Byrne. So not only are you providing jobs to all these 
people, you are an integral part of your local community. We 
depend upon people like you. Colonel Carey is one of our big 
leaders in our Chamber of Commerce. I mean, you are the bedrock 
of our communities, and the idea that we would change the law 
and take the employment opportunities away from all your 
employees and the support you give to our communities not only 
as small business people, but active in your communities, is 
just beyond me why we would think that is a good idea.
    So I want to say I appreciate what you do, and I know you 
did it because you were trying to do something right for your 
family. But by doing something right for you and your family, 
you have benefitted your communities and the Nation. And so, I 
will pledge for myself, I am going to do everything I can to 
try to preserve this, not just for you, but for years to come.
    Mr. Debruge, your testimony was compelling. I am a native 
Alabamian, and I am very proud of what we have accomplished in 
Alabama just since 1993. You mentioned the automotive industry. 
In 1993, we did not have a single steel plant in Mobile County. 
We have three now that employ over 4,000 people. Really great 
jobs, pay great wages, provide wonderful benefits.
    But they did not just show up here. We worked as a 
community hard to get them to come here. We worked hard to get 
those steel plants. We worked hard to get Austal Shipyard. We 
have worked like crazy to get Airbus to open up here, which 
they are going to open up next month, and we hope that there 
are a whole bunch of suppliers coming with Airbus.
    Now, what happens to that economic development model for 
Alabama, and for southwest Alabama, and for other southern 
States because a lot of southern States have done it, what 
happens to that if the NLRB changes the joint employer 
definition?
    Mr. Debruge. I think, and I will try to be succinct, a 
couple of things. First, it is going to be more expensive to do 
business here. The labor costs are going to go up, efficiencies 
are going to go down. And I think the best example I can give 
you is what happened, the painful memory of 2008 and 2009. And 
as I listened to CNBC and Fox Business yesterday I had a 
flashback to what that felt like, lest we forget.
    General Motors went bankrupt, Chrysler went bankrupt, and 
they had to be bailed out. For a variety of reasons they went 
bankrupt. The root cause is people did not have the money or 
the credit to buy cars, and they could not adapt. They were not 
flexible, and they were weighted down by union contracts, so 
that made it incredibly difficult to respond to the market.
    By contrast, all of the plants in Alabama stayed open. 
Toyota stayed open. BMW stayed open. The transplant operations, 
as we would call them, were flexible. They had a contingent of 
temporary workers that they were able to shed in order to keep 
their regular people employed. Every company approached it in a 
different way, but the bottom line is these union free diverse 
workforces with different categories of employees and 
contractors were able to respond to those market conditions.
    We still have those jobs in Alabama, and they have 
increased exponentially since then. Every one of our major 
manufacturers has expanded. And so, if all of a sudden their 
ability to be flexible, to staff their plants in the way they 
need to staff them is taken away, and this one-size-fits-all 
approach is imposed on them, and they have to collectively 
bargain, along with multiple employers, with a diverse 
workforce, it spells disaster, in my opinion.
    Mr. Byrne. Well, thank you for that. Thank all of you being 
here. My time is up, and I yield back, Mr. Chairman.
    Chairman Roe. Okay. I thank the gentleman for yielding. 
Being an employer for 30-plus years, I think the person who 
signs my paycheck is my employer. In my case it is me, but 
whoever writes that check to me is who is employing me, I 
think. Would you all agree with that?
    Mr. Holmes. Yes, sir.
    Mr. Debruge. Yes.
    Chairman Roe. Mr. Holmes, if somebody is working in your 
restaurant or, Colonel Carey, you are servicing a home, 
painting a home, when you sign that check, it is not CertaPro 
that signs that check. It is you. It is Steve Carey that signs 
that check and puts it in the mail. That is who those employees 
work for.
    Do you all see this, if this joint employer status, if the 
NLRB rules that way, do you see this as promoting job growth in 
this country or stifling job growth in this country?
    Mr. Carey. Well, I think it will stifle it. In my view, 
small businesses, in particular, at my level of business, and 
even the independent-owned businesses, we are a fragile entity. 
A lot of times we kind of just hover on the edge of success and 
failure tied to the economy, tied to weather. If I can have the 
flexibility to make critical decisions, to trim employees at 
the right time, to be more aggressive in a certain marketing 
venue, and I make those decisions based on my business 
assessment, I stand a much higher likelihood of being 
successful, whereas if I am driven to kind of follow a model, 
to sort of march in line with what a larger company decision 
above me has enforced upon me, then I am less likely to show 
that flexibility and to survive, which is what it honestly 
takes at the lower levels of business.
    Chairman Roe. And what I see with the franchise model, as 
you pointed earlier in your statement, is what is going on in 
Kansas may not be going on in Mobile, Alabama.
    Mr. Carey. Exactly.
    Chairman Roe. It may be very different. And the business 
conditions and environments there may be different, and that 
allows you to adapt very quickly. And that is one of the 
reasons I think the franchise models work so well in the 
country and why almost 9 million people work for it. It can 
turn on a dime.
    And even though McDonald's, let us say, is a huge 
corporation, most of them are run by just local people in local 
communities. And so, they can adapt to the local environment 
much more quickly than somebody in California, where their 
headquarters is, can adapt to it.
    Mr. Carey. Here is a great case in point. Four or five 
years ago, I was pretty new to the franchise business, and I 
wanted to invest in TV, which is a lot of money for a very 
small business like mine. The corporate folks at CertaPro, you 
know, they offer advice, but they said, you know, that is 
probably not a good idea for you, you know. It will put you at 
a higher risk. I--as the business owner--made that decision at 
a risk to myself, and it was a great decision because it 
catapulted me quicker in terms of branding and my market.
    But, again, that was my decision, and I could either be 
successful or fall on my own decisions, but that is what we 
want to hold onto. That is what makes us, you know, 
entrepreneurs and businessmen.
    Chairman Roe. Here is another question I have, and this is 
to Mr. Holmes, basically two questions. One, what are the 
benefits, and either one of you can answer this, of buying a 
franchise instead of opening an independent restaurant? In 
other words, what is the benefit of the brand to you as a 
business person?
    Mr. Holmes. Well, just using the sports analogy that you 
mentioned earlier about basketball, it is sort of like having a 
great game plan for a coach, whether it be, you know, football 
or basketball, and they have, you know, the playbook, and this 
playbook works. And we have seen it. It is Coach Wooten's 
playbook, and it works. So I would want to take that playbook, 
and I would want to execute that playbook, and then that would 
help me be successful. That is the same with franchising. 
Franchisors have a successful playbook. They have the logos, 
they have the recipes, and they have the procedures; all those 
things already in place for you to be successful.
    So it removes a lot of the risk. It does not remove all of 
it as an operator. You still have to go out and secure jobs and 
get business, and then you have to satisfy those customers, but 
you already have the big part taken care of. You do not have to 
create something that causes a lot of risk. You already have 
that in your playbook.
    Chairman Roe. It is a proven business model.
    Mr. Holmes. Yes, sir.
    Chairman Roe. That is what it is. As a former employee at a 
quick service restaurant, quick business, why did you decide to 
become a franchisee instead of moving up the ranks in the 
corporate structure? Why did you do that?
    Mr. Holmes. Well, like I said in my testimony, I was 
actually a dishwasher at 19, and was able to move up with that 
corporation as a district manager of ten steakhouses. And 
through different things that happened to our corporation, it 
was buy-outs. They got bought out several times, which created 
a lot of debt. It removed a lot of the opportunity, and then we 
were faced with some bankruptcy in that steakhouse chain.
    So I went that route, I tried that ladder, and someone else 
controlled my destiny. Someone in a board room or on the stock 
market, I do not really know, but it was not me inside those 
four walls of that restaurant. So owning my own business was 
very appealing because I controlled my own destiny. And so, the 
franchise model, after I was exposed to it, was a great step to 
that because it removed some of the risk of, you know, going 
out and creating my own thing.
    But now on a daily basis I control my own destiny. And I 
will add really quickly, when we talk to business owners, it 
used to be that just finding good people was some of the 
biggest threat. Finding good people to work with, finding great 
customers, and just continuing the profitability of your 
business. Now we say our biggest threat is government 
regulations. That is our biggest threat.
    Chairman Roe. My time has expired. Mr. Byrne, you are 
recognized.
    Mr. Byrne. Thank you, Mr. Chairman. When I was listening to 
you talk, Mr. Holmes, I was thinking about a biography of 
Benjamin Franklin I read a couple of months ago. He was a small 
business guy.
    Mr. Holmes. Yes, sir.
    Mr. Byrne. He had a print shop, and he organized all the 
other small business people in his community, and they worked 
together to try to help one another, and that is what built 
America. And when he was sitting there in the Constitutional 
Convention, I know he had in his mind, because that was his 
background, what is going to help create the environment in 
which people can do what I did, which is start my own business 
and make it grow, where I take responsibility, and I employ 
people?
    And I cannot imagine that he and the other people that sat 
in the Constitutional Convention would have dreamt in a second 
that the government they were creating would take away from 
people the opportunity to create that. So I just wanted to 
offer that.
    But also I want to go back to both you and Mr. Carey. What 
does this do to your employees? I mean, we are concerned about 
you obviously, but what about your employees, the people you 
employ? If this definition is changed, what is it going to do 
to them?
    Mr. Carey. You know, as I created my business, one of the 
things I have tried to do is to create a culture within my 
small business. Although most of my painters are 
subcontractors, I want them to understand that we are 
delivering something from the standpoint that they have never, 
ever thought about. I want my painters, my supervisors, my 
production managers, to look at me, to look at the business 
with pride. And sometimes you tend to lose that identity of a 
small business of what you can represent if you become big. The 
more global you are at the lower levels, it is a lot harder to 
identify.
    So in my case, I think it is easier for my painters, my 
subcontractors, to identify with a guy or a gal, Steve Carey 
sitting there, you know, trying to build a culture, and you 
create loyalty when you do that. And from that loyalty, you 
create pride, and you can grow the professionalism and the 
brand at a small local level. But we risk losing that, the 
identity of that small business if we become, you know, in a 
position where we are driven by a larger--
    Mr. Byrne. You have got a closer relationship between you 
and your employees than if they are working for some big 
company.
    Mr. Carey. Right.
    Mr. Byrne. And that benefits them because they can come and 
see the owner of the company, just walk in your office to see 
you.
    Mr. Carey. Right, and they do.
    Mr. Byrne. Mr. Holmes, what about your employees?
    Mr. Holmes. Well, I mean, I agree with Mr. Carey. The 
upside to this is very limited. The downside to this going into 
effect is huge. There are already systems in place to represent 
our employees if they are being mistreated in any way. So I 
think the result will be they will lose opportunity in the 
future. It will be removed from them.
    We have just in my Firehouse Subs a history, I have an 
employee that now owns his own Firehouse. He started with us as 
a college student, got out of college and he and his father-in-
law opened their own Firehouse Subs. They own two restaurants. 
I have a general manager that owns his own Firehouse Subs now. 
I have another general manager who owns his own Firehouse Subs 
now. Both of those gentlemen worked for us for eight to ten 
years. I had an inspector, you know, he would go around helping 
people out, that worked with us for years. He now owns his own 
Firehouse Subs.
    And so, you know, with that, this regulation will basically 
remove all that opportunity, every bit of it. So I look at it 
as we are removing the opportunity in the future for the 
employees.
    Mr. Byrne. Mr. Debruge, you and I both have practiced in 
this field for a long time. How big a change in precedent would 
this change in definition be?
    Mr. Debruge. I think a good way to illustrate this, and I 
do not want to upset or depress my fellow panelists any more 
than they already are.
    [Laughter.]
    Mr. Debruge. But I do not think they really see the train 
that is coming from the other direction. The focus rightly is 
on control from the top and the loss of flexibility. The NLRB 
is about unions and the National Labor Relations Act. They are 
looking at liability for unfair labor practices possibly, the 
idea of secondary action, them being pulled in as joint 
employers and no more immunity from secondary boycotts, 
strikes, or picketing.
    But also, and this may be the most chilling thing, they may 
have labor contracts imposed on them because if they are in a 
joint employment relationship now, and let us say, for example, 
the Teamsters can organize, on a nationwide basis, everyone who 
is an employee or even a subcontractor of these entities. And I 
cannot think of anymore interference with their direct 
relationship with their people or the loss of flexibility and 
control than to have a national labor contract imposed on them 
through this new definition of joint employment.
    It is really difficult even to comprehend that we would go 
down this road in this 21st Century economy with the sort of 
workplaces that we have. It makes no sense at all, unless your 
goal simply is to try to get more people to belong to labor 
unions.
    Mr. Byrne. Thank you, Mr. Chairman. I yield back.
    Chairman Roe. Along that line, the NLRB's job and purpose 
is to--look, I grew up in a union household. Full disclosure: 
my dad belonged to a union, worked in a factory, and basically 
he had a right to belong to that union or not belong to that 
union. He had a right to vote and so forth, and that is fine. 
In America you can do that if you want to do that.
    This current NLRB, for the record, has pushed ambush 
elections. Before we had union elections in 38 days. It takes 
40 days to take a chicken to where you can eat it, and that is 
pretty quick I think. 38 days: that is the average time. It 
would give employees and employers a chance to understand what 
it means. If they want to vote for a union, fine, they can do 
it. Now that is 11 days.
    As an employer, I could not find you in 11 days to have you 
represent me to get a labor lawyer. Two micro unions, and not 
for the small business people, but where you have a business 
like a Bergdorf Goodman or others where you have the shoe 
department, the women's department is different than somebody 
else. You cannot cross-train people. People cannot move up, as 
Mr. Holmes talked about.
    And, Mr. Holmes, I could see the pride in your face when 
you talked about the people that work for you that now are 
small business owners and succeeding. I mean, we want people to 
succeed in the workforce. If you get good employees, they will.
    Card check. We have a bill out there, the Secret Ballot 
Protection Act. Colonel Carey put on a uniform and for 30 years 
protected this country so we have a right to vote. And I say 
this, I have said it publicly, my wife claims she voted for me. 
Maybe she did, maybe she did not. She had a secret ballot.
    [Laughter.]
    Chairman Roe. She said she did, and I assume she did, but 
that is what it is for. Why in the world would we give that up? 
I was elected by a secret ballot. The President was elected by 
a secret ballot. Why should anybody not be elected by a secret 
ballot? And this NLRB is the most activist NLRB in the history 
since 1935 when it first came into being.
    And, Mr. Debruge, I want to ask you a question today. I 
want this for the record. We have heard a great deal about the 
joint employment and the franchise system. However, the 
potential holding in Browning-Ferris will apply beyond the 
franchise system. Who else will be affected by this decision?
    Mr. Debruge. Virtually everyone who is involved in any kind 
of arrangement whereby they use different categories of labor 
in their business on their worksite, people who use temporary 
employees, contractors, subcontractors. You know, I have talked 
about manufacturing, but really any entity, Mr. Chairman, where 
today the company, it is clearly defined employees in these 
other categories, they are going to be impacted.
    Chairman Roe. So once you have started down this slippery 
slope, there is no end to it then.
    Mr. Debruge. Yes, sir.
    Chairman Roe. Almost any employment arrangement could 
almost be identified. Am I correct on that?
    Mr. Debruge. You are absolutely correct, yes. This new test 
is nebulous. Looking at the economic or the industrial 
realities, it is just almost a blank check for the NLRB to 
create these joint employment relationships whenever it wants 
to.
    Chairman Roe. So as I was telling you before the hearing 
started, in a large distribution center, I will not mention who 
they are, but I was in one the other day, which was huge, 
million square feet. And obviously during holiday times, be it 
Christmas or, you know, maybe Valentine's Day, when business 
picks up, they hire temporary employees. Would it affect them 
also?
    Mr. Debruge. They could very well be, yes, sir.
    Chairman Roe. Okay. I guess one of the other questions for 
Colonel Carey and Mr. Holmes is how much involvement does your 
franchisor have in the daily affairs of your staff in running 
your business day-to-day. When you get up in the morning, when 
you leave this hearing, and you guys go back to work tomorrow, 
today, this afternoon, are you going to call CertaPro and say, 
Mr. Jones worked eight hours today? How much do they do each 
day if they affect your business?
    Mr. Carey. None.
    Mr. Holmes. None. The same, none. We do not communicate on 
employee relationships like that.
    Chairman Roe. Both of you are truly independent, meaning no 
strings, independent business owners.
    Mr. Carey. Very, and that is what I love about it. The good 
part, though, too, is I do have a hotline. I mean, I have a 
phone that I can pick up. I can call one of my other 
franchisees to ask for advice. I can call at the corporate 
level to say I have got a scenario here, what have you seen 
occur with other businesses. So that conduit of experience that 
can help me make the right decisions, I have that open channel.
    But beyond that and beyond the normal guidance that they 
give for branding and standardization, I do not have daily 
engagement with them. I mean, maybe once a month I reach out to 
them, but generally I do not.
    Chairman Roe. Well, what I have heard today in this 
testimony from all of you all and Mr. Byrne is that I think it 
has been fairly clearly laid out what the motivation of the 
NLRB is, and that it will be deleterious. It certainly will 
interfere with your business model. It may stop it all 
together, but it will certainly make it harder for you to grow 
your business. And you did not go into this, but Mr. Holmes has 
already been through that experience once. And I think we see 
what the motivation is.
    With that, I yield to Mr. Byrne.
    Mr. Byrne. Thank you, Mr. Chairman. When we were in a 
hearing on this or perhaps another topic in Washington a few 
months ago, some of our colleagues from the other side of the 
aisle were saying, well, you know, we are acting as if we are 
assuming the NLRB is going to make this type of decision or 
that type of decision, and we do not know that.
    And I said then and I am going to say again, I know exactly 
what the NLRB is going to do. This Board is going to do 
whatever the union wants them to do, and that is not the way 
this was set up. Mr. Debruge, I think the Chairman put it very 
well: The Labor Board is supposed to be our referee. It is not 
supposed to come down on the union side, it is not supposed to 
come down on the management side, but keep the equilibrium that 
was established under the law.
    This Labor Board is trying to definitely weight tilt this 
equilibrium away from that balance and to one side. And it 
really does not matter which side it is because the law was set 
up to maintain the balance. So I think I know what the Labor 
Board is going to do. They are going to continue to do 
everything they can to help unionization.
    And I really think, Mr. Chairman, that ought to be up to 
the employees. And to take away from the employees by these 
sort of backdoor methods the ability to work with their own 
employers, people that are local to them, people that they 
know, that they see face-to-face, is just un-American. But the 
political environment we are in, that is the reality, and this 
Labor Board is going to continue to do that.
    And I would be interested, Mr. Debruge, is there something 
you think that we could do in statutory law that could rectify 
this?
    Mr. Debruge. Assuming you could ever get it through this 
Congress, of course. There could be modifications to the 
National Labor Relations Act. There could be language inserted 
to prohibit multi-employer bargaining units, for example. There 
could be clear direction in the statute about who is and who is 
not an employer, defining these joint employer relationships.
    Mr. Byrne. We would essentially--excuse me--put it into 
statute what has been the recognized precedent of the Labor 
Board for decades.
    Mr. Debruge. Yes, sir, or if there is a way to limit the 
ability of the Board to do through regulatory fiat, you know, 
what they are accomplishing. And, Congressman, you make an 
excellent point, as does the Chairman. The Board was not 
intended to be an advocate for one side or the other. It was 
supposed to enforce the National Labor Relations Act.
    This Board over the past several years, I think, has done 
lasting damage to the entity, to the concept. Day in and day 
out, Board agents, long-timers, 30-plus years people shake 
their heads and are surprised at what is happening in 
Washington at the general counsel level in particular and with 
obviously the Board itself.
    And I cannot speak for them, obviously, but the impression 
I get is they feel like the damage is almost irreparable, that 
people are going to expect now with every political cycle it to 
sort of be just whose turn is it to do this, or to fix this in 
kind of tit for tat. And that is not good for labor. It is not 
good for employers. It is not good for the country.
    And I think in Europe and in Asia, they look at this model 
and they must just shake their heads in disbelief, that we 
politically do not have the will to fix this, to put in place a 
system that actually works, that protects employees, that 
encourages job growth. But instead we adhere to this fatally 
flawed system that we have had since 1935, and we are watching 
it be manipulated.
    Mr. Byrne. You know, there is a reason why all these 
foreign companies are located here. We provide them a labor and 
employment environment and quality employees. Let us face it, 
it is the quality of our people, and they are coming here 
because they want to take advantage of that. And as a result, 
if you look at the American economy versus the economy of other 
countries around the world--I will not pick any--the American 
economy is where everybody is looking to say there is the 
bright spot right now. Not a whole lot of bright spots watching 
the stock market in the last several days. We are the bright 
spot because we have maintained this sort of freedom of 
activity by both employers and employees.
    And now we want to take it away and remove the one bright 
spot that we can offer to the worldwide economy? Mr. Chairman, 
I just do not get it. I do not know why in this environment we 
would want to do something like this. I understood what Mr. 
Debruge was saying that we got to get it through the Congress 
and that there are some hurdles to that, but my mother always 
taught me you got to start somewhere.
    And I just think, Mr. Chairman, we have got to start 
thinking about legislation and maybe it does not pass this 
year, maybe it does not pass next year. But we are going to 
have to pass some legislation to enshrine in statutory law what 
has been the NLRB precedent for decades to make sure we 
preserve a system that has worked for decades.
    And I yield back.
    Chairman Roe. I thank you. I think of the old adage ``if it 
is not broke, do not fix it.'' When you have got something that 
has already provided 9 million jobs and billions of dollars to 
the U.S. economy and is growing, why would you want to stifle 
that unless you had another motive?
    You know, I was standing in Beijing, China, two and a half 
years ago, with this committee on a trip. And it dawned on me 
when I was in Beijing, a country of 1.4 billion people, we have 
315 or so million people in America, that this country because 
of our system, unless we do something to stop it, this 
entrepreneurial free spirit that we have produced more goods 
and services. One-fourth of the people produced more goods and 
services than a country with four times as many people, which 
shows you how productive it is when you turn and allow that 
entrepreneurial spirit to flourish.
    And I want to get on the record one of the reasons I think 
that this is going on. The General Counsel for the NLRB is a 
gentleman, Mr. Richard Griffin, who was a recess appointment to 
the National Labor Relations Board, and his term expired. The 
way he got to be general counsel, and I want to make sure this 
is in the record, in return for voting for cloture on the 
President's nomination to the NLRB and Consumer Financial 
Protection Bureau, Senate Democrats agreed not to change the 
Senate filibuster rules to lower the maximum threshold required 
to approve executive nominees from 60 to 51. That is how he got 
there. It was a political deal, and this deal, now we are 
dealing with it.
    We should not be wasting our time on this in this committee 
hearing. We should be spending our time on how to, as Mr. 
Holmes said, to lower regulations. Just to give you an example, 
and it pains me to say this, that I have a friend at Vanderbilt 
University, having two degrees from UT, but he's the chancellor 
there. He is a friend, Nick Zeppos. Dr. Zeppos analyzed the 
reporting requirements that he has to do at Vanderbilt 
University, and this was just not there. Just those 
requirements added $11,000 for every student's tuition.
    It is ridiculous that we are doing that. Instead of making 
it more expensive to go to school, we should be making it less 
expensive. Instead of making it harder to start a business and 
run it like you are, we should be looking at ways to make it 
easier as Mr. Byrne just clearly said.
    I have no further comments. Mr. Byrne, do you have any 
closing remarks you would like to make or questions you would 
like to ask.
    Mr. Byrne. I would just like to thank the panel. I think 
that you very, very ably clarified and sharpened the 
understanding of this issue, and help created the record that 
we can use going forward. And to pledge to each one of you and 
to the people that I represent down here in the 1st 
Congressional District, I am going to do everything I can to 
make sure that we preserve what has been a system that has 
worked so well, and is not only producing wonderful small 
businessmen as you see here, but it is producing jobs for 
individual people that work for you, and creates local people, 
local businesses that are part of our community, and do so many 
good things.
    So I am going to continue to work with the chairman here 
and with other people on the staff of the committee to see what 
we can do try to push back against this. And I yield back, Mr. 
Chairman.
    Chairman Roe. I thank the gentleman for yielding, and I 
want to, again, take the time to thank the witnesses for taking 
your time and effort to do this, to come in front of us, and 
make this part of the congressional record. I want to thank our 
staff who came down early, and the University of South Alabama. 
I appreciate all the hospitality you all showed, and certainly 
our security folks who are here today, thank you for being 
here.
    You now, it is a privilege to live in this great country, 
and we would not be able to live in this country if it were not 
for veterans like Colonel Carey that put his family on hold 
many times. He said he dragged his wife halfway around the 
world for 15 years to maintain that.
    This country did not become great by more and more 
regulations. This country became great because of the freedom 
that we have to operate in this great system, and it has made 
it possible because of Colonel Carey and other veterans have 
done. And I want to thank you personally for your service.
    Also, what has been the backbone of America has been small 
business. We know that most of the jobs are created in this 
country by small business people, and they take great pride in 
it. And I can tell you as a small business person, the single 
most important thing in my business were the people that worked 
with me, not for me. They worked with me. And I had many people 
that worked with me for almost 40 years, loyal employees that 
got up every day and came to work and gave their best effort.
    And that is what has helped make this country great. You 
see it. I talked to some of the police officers that were here. 
They take great pride in what they do, and that has been public 
service. Other Americans do that, and I know Mr. Byrne does. 
And thank you all here in south Alabama for sending Bradley 
Byrne to the U.S. Congress. I mean, a breath of fresh air, and 
he has certainly been terrific to work with on this committee.
    Look, I am a doctor, and usually when I see lawyers, you 
know, my blood pressure goes up and all that.
    [Laughter.]
    Chairman Roe. But he has brought an expertise to our 
subcommittee and to our full committee that was very much 
needed. And I want to thank the people of South Alabama for 
sending such a skilled citizen servant to the U.S. Congress.
    And with that, I thank you once again for being here. No 
further business, the meeting is adjourned.
    [Whereupon, at 11:12 a.m., the Subcommittee was adjourned.]

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