The U.S. House of Representatives today approved the Save Local Business Act (H.R. 3441), which would provide a clear definition of “joint employment” under the National Labor Relations Act (NLRA) and the Fair Labor Standards Act (FLSA) if enacted. More importantly, it would reverse the National Labor Relations Board’s (NLRB) expanded joint-employer theory promulgated in its 2015 case Browning-Ferris.
As this blog has observed on numerous occasions, the Browning-Ferris decision upended well-settled legal principles with regard to joint employment. 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 supplanted that clarity with a vague and sweeping standard based on “indirect” control or even the “potential” to control based on the rationale of erstwhile Wage and Hour Division (WHD) Administrator David Weil. Weil had written extensively 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 issued an “Administrator’s Interpretation” that attempted to use a so-called “economic realities” test to define employment under the FLSA, and the NLRB followed suit using a similar theory to define joint employment under the NLRA by applying it in Browning-Ferris.
As a result of this flawed theory, many businesses face potential legal liability for individuals they do not actually employ and for workplaces they do not actually control. It ensnares businesses such as franchisors that are in reality independent from their individual franchisees, and it could implicate companies that use subcontractors, as well as companies that are the major purchaser of goods or services from a particular vendor or supplier.
The Save Local Business Act would reverse the 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.
As this blog observed after the bill passed out of committee, this issue is still in court and could also be addressed by the NLRB’s new Republican majority, but that does not obviate the need for this legislation to pass. If enacted, the Save Local Business Act will provide a legislative solution that is needed to deliver clarity and stability for the business community. Its passage from the House is a positive development, and one hopes passage in the Senate will follow soon.