Small Businesses Would Be Covered by the Employee Free Choice Act

Current NLRB Threshold, Which Is Not Changed By EFCA, Covers Most Small Businesses

There is a widespread misperception that the Employee Free Choice Act (EFCA) will not apply to small businesses, with at least one commentator concluding that “the corner grocery probably won’t face an organizing drive.” Wrong.

The reality is that small businesses will be covered by EFCA.

EFCA contains no small business exemption. Thus, a small business is only exempt if it falls under the existing National Labor Relations Act exemption, which generally only exempts companies with less than $500,000 in gross revenues.

Low Jurisdictional Standard Established in 1959

Under the NLRA, the National Labor Relation Board (NLRB) has jurisdiction over labor disputes including elections, bargaining, and unfair labor practice questions. This applies to large and small businesses alike. Though there is no exception in the statute based on business size, the NLRB has adopted jurisdictional standards that cover small businesses under the Act.

These standards are based on an annual minimum dollar volume of business (as opposed to profit), which varies for different enterprises or industries, with separate thresholds for over 30 different categories of businesses. These generally range from $100,000 (office buildings, radio or television stations) to $500,000 (hotels, restaurants, country clubs, and casinos).

These standards have not been adjusted for inflation for 50 years and, because they are so low, the NLRB casebooks are filled with cases involving small businesses. For example, in a case called Pit Stop Markets, 279 NLRB 1124 (1986), the NLRB applied the retail business standard asserting jurisdiction over an employer operating a convenience store/gas station. This store averaged about $100,000 in gross sales of groceries and $1 million in gross gasoline sales even though the employer received a mere $43,000 in commissions from the gasoline distributer. The Board determined that “it is the gross volume sales amounts to which the Board looks to determining jurisdiction, not profit margin or some other yardstick.”

Even the Small Grocery Store Is Covered by EFCA

The Board’s meager jurisdictional standards would not be amended under EFCA. Contrary to commentators’ claims, EFCA would apply to all but the smallest small businesses including the “local corner grocery.” For example, in a case called Tonnor Brother Foods, Inc., 200 NLRB 409 (1972), a grocery store with a total of 20 employees (eight of whom were part-time high school students) was covered under the NLRA. This corner grocery met the jurisdictional threshold in 1972, and the result would be the same today if EFCA were to be enacted. More recently, the NLRB, in J. Shaw Associates, 349 NLRB 939 (2007) asserted jurisdiction over an Exxon station and Blimpie stand with nine to 13 employees. The result would be the same if EFCA passed. The legislation simply does not exempt small businesses.

In Summary, the Negative Impact on Small Business Cannot Be Overstated

The fact that most small businesses would be covered by EFCA is no small matter. As is noted by University of Chicago Professor Richard Epstein in The Case Against the Employee Free Choice Act:

Small businesses, which as a group are the largest source of new jobs in the country … often operate on small budgets, without the assistance of full-time lawyers. Under EFCA, their first exposure to unions could come at the conclusion of a secret campaign, which requires them to both hire and acquire expertise on contentious matters for which they are ill-equipped to deal, at a cost which they can ill afford to bear. These calls for unionization will divert management from the essential tasks of product development, marketing and sales on which their business models necessarily depend.

So, if you are small business owner, this law probably covers you.

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