Eight years after the Great Recession, many in the country still struggle economically. While we continue to look forward positively with respect to the future, we need economic policy initiatives that promote growth and fuel our entrepreneurial spirit. Technology has allowed many more people to work for themselves and build economic security. This is even truer for the African American community, which has traditionally been locked out of opportunities in corporate America, but for whom, as the chart below shows, is starting to see some modest improvement. Economic independence is one key to our future.
There are many pathways to achieving the American dream. Some of these pathways lead to entrepreneurship and to the use of empowering and flexible business models, such as franchising and the shared economy.
Recent economic policy initiatives may serve to block the door to opportunity. Specifically, federal and state efforts to expand the definition of a “joint employer” beyond the traditional legal definition of “direct and immediate” control may reduce opportunities for the Black franchisor and for Black creatives in the sharing economy.
Let me explain.
Under the newly expanded definitions, employers who possess “indirect” or “unexercised reserved” control might be considered a “joint employer”. The uncertainty that business owners feel over this matter might limit the ability of an employer to provide critical support for employees, like worker training and development, apprenticeship programs, corporate social responsibility programs, and guidance on compliance. For instance, if I own a franchise and the corporate entity offers tuition assistance, it could be determined that the corporate office has indirect control over my employees. Additionally, If I have a contract with Google, which requires I offer paid vacation to my employees, those employees might be considered indirect employees of Google. This designation could have any number of confusing and negative consequences, including tax and liability. In the absence of clarity, employers are considering whether to refrain from offering these critical programs altogether.
In what has become a rarity in American politics, a bipartisan effort is underway to clarify this problem. HR 3441, the Save Local Business Act, is designed to clarify the new standard and allow business owners to have more certainty going forward.
Our economic analysis suggests this law is needed to maintain the progress as evidenced by the chart and to continue to propel the employment gains we have seen in the Black community.