On October 4, the U.S. House Committee on Education and the Workforce approved a bill that would reverse the National Labor Relations Board’s (NLRB) expanded joint-employer theory as expounded in its 2015 case Browning-Ferris. The bill, the Save Local Business Act (H.R. 3441), would restore a clear and well-understood standard for defining joint employment under the National Labor Relations Act (NLRA) and the Fair Labor Standards Act (FLSA).
As this blog has observed on numerous occasions, the NLRB’s Browning-Ferris decision essentially rewrote the so-called “joint-employer” standard. For decades, two companies shared liability only if a brand name company or a business that engaged in contracting exerted significant control over the employees of a franchise or subcontractor. This “direct and immediate” control standard provided clarity for employers and workers.
Browning-Ferris replaced this with a vague and sweeping standard based on “indirect” control or even the “potential” to control — ensnaring all manner of businesses in potential legal liability. Businesses that could be harmed by this new policy include many franchises, companies that use subcontractors (such as construction, janitorial services, landscaping, accounting, etc.); and companies that are the major purchaser of goods or services from a particular vendor or supplier.
The intellectual origins of the NLRB’s joint employer theory came from David Weil, who headed the Department of Labor’s Wage & Hour Division (WHD) during the Obama administration. Weil wrote about “the fissured workplace” and espoused the idea of holding businesses jointly liable for another party’s employees in business relationships where such liability did not used to exist. While in office, Weil also issued a so-called “Administrator’s Interpretation” that attempted to broaden how the WHD should interpret and enforce joint employment under the FLSA.
The Save Local Business Act would reverse this overreach at the NLRB and WHD by setting forth the following definition of joint employment for the NLRA and the FLSA:
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 essential terms and conditions of employment, such as 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, or administering employee discipline.
In the meantime, it is worth noting that the United States Court of Appeals for the District of Columbia Circuit currently is considering Browning-Ferris, though there is no way to know how the court will rule on it. Moreover, the newly minted 3-2 Republican majority could decide to restore the previous joint employer standard. That, however, would not obviate the need for Congressional Action on HR 3441 as a future Board could always re-impose the broader standard if the NLRA is not amended.
Thus, if enacted, the Save Local Business Act would provide a legislative solution that is preferable to hoping the courts or the NLRB get things right, and it would deliver much-needed clarity and stability for the business community by settling this issue.