‘Joint-Employer’ Bill Introduced to Protect Small Businesses

Co-sponsors want to solidify definition of who is an employer

Allen Smith, J.D. By Allen Smith, J.D. July 28, 2017
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​Some congressional representatives want to rewrite the National Labor Relations Board's (NLRB's) 2015 definition of "joint employer" and introduced legislation on July 27 to do so.

The Obama administration board's shift to an indirect-control test from a direct-control standard made it too easy for franchisors and franchisees to become joint employers and presents obstacles to companies trying to expand or stay afloat, small business owners said at a press conference in Washington, D.C.

Four House Republicans and one Democrat introduced legislation to overturn the NLRB's 2015 Browning-Ferris decision, which defined joint employer broadly.

The lawmakers opted not to wait for Republican nominees to the board—William Emanuel and Marvin Kaplan—to be approved by the full Senate before attempting to overturn Browning-Ferris. If their bill is enacted, it would permanently define joint employer so that the definition could not be rewritten by subsequent Democratic boards. The NLRB is known for reversing course on major holdings depending on which party controls it.

"Thousands of small businesses don't need temporary fixes," said bill sponsor Rep. Andy Harris, R-Md.

'Pretty Confusing' Standard

The Browning-Ferris decision said that businesses with indirect control over other entities were joint employers, which contradicted the traditional definition of joint employers as businesses with direct control over other entities. Indirect control might exist if an employer reserves the right to control another entity but doesn't exercise this right, such as an employer that includes such language in an agreement with an independent contractor, or a franchisor that reserves this right with a franchisee.

For 30 years, since the establishment of the traditional definition of joint employer, business owners and attorneys thought they knew what they needed to do to become someone's employer, said Rep. Bradley Byrne, R-Ala., lead sponsor of the legislation. There had to be direct control. From an employee's standpoint, the person who signed the paycheck and told the employee what to do every day was the employer.

But under Browning-Ferris, which is on appeal to the U.S. Circuit Court of Appeals for the D.C. Circuit, an entity with no contact with the employee also may be the employer, he said. "It's pretty confusing to the employee," he said.

For businesses, the uncertainty around the NLRB's vague standard interferes with the ability of entrepreneurs to start and grow businesses, he said. "We're dead serious" about getting the bill through the House and the Senate and sent to the president, "who we know will sign it," Byrne noted, saying the bill had bipartisan support.

Bill Would Require Direct Control

The Save Local Business Act would amend the National Labor Relations Act to state, "A person may be considered a joint employer in relation to an employee only if such person directly, actually, and immediately, and not in a limited and routine manner, exercises significant control over the essential terms and conditions of employment (including hiring employees; discharging employees; determining individual employee rates of pay and benefits; day-to-day supervision of employees; assigning individual work schedules, positions and tasks; and administering employee discipline)."

[SHRM members-only HR Q&A: What is the function of the National Labor Relations Act?]

Sponsor Rep. Henry Cuellar, D-Texas, said owners of franchises believe the Browning-Ferris decision is a "threat to the life of the franchise industry," adding, "We've heard the message loud and clear from businesses."

Since the Browning-Ferris ruling, large franchisors have seen small franchisees as a risk and are relying more on super-sized franchisees that have HR professionals to help fight off lawsuits, said Ed Braddy, a Burger King franchisee owner in Baltimore.

Kristie Arslan, co-owner of Popped! Republic, a maker of popped gourmet popcorn in Alexandria, Va., said she decided not to use the franchising model to expand her business when she learned about the potential risks under the joint-employer definition. "Our biggest fear is legal issues. One lawsuit could put us out of business," she said, expressing hope that the bill will, if enacted, provide "some certainty so we're able to take business to the next level quicker."

Shana Gonzalez, a Checkers franchisee owner in Atlanta, said the NLRB's joint-employer definition was confusing for franchisees and had led to franchisors stepping further back from their franchisees.

Other bill sponsors are Rep. Tim Walberg, R-Mich., and House Education and the Workforce Committee Chairwoman Virginia Foxx, R-N.C.

Decision Would Be 'Undercut'

Not everyone supports the bill. Christine Owens, executive director of the National Employment Law Project said, "The bill would undercut a carefully considered NLRB decision in the Browning-Ferris case, where the company temped out 280 of its recycling worker positions, retained significant control over workplace operations but then left the staffing company on its own to negotiate with the workers when they wanted to form a union. If workers come together to bargain, they should be able to bargain with the employer who's really calling the shots," she said.

However, David French, National Retail Federation senior vice president for government relations, said, "Retailers are relieved that lawmakers are stepping in to clear up the confusion created when bureaucrats muddied the water on what constitutes a joint-employer relationship. One business should not be held responsible for the actions of another, and this measure will clarify that once and for all."

 

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