Vice President, Labor Policy, U.S. Chamber of Commerce
July 19, 2017
On July 12, the House Committee on Education and the Workforce held a hearing to examine the expanded definition of joint employment under federal labor laws. This expansion has upended well-settled legal principles and threatened businesses both large and small with expanded liability related to commonplace business practices like franchising and subcontracting.
As observers of labor policy know well, on August 27, 2015, the Obama-era National Labor Relations Board (NLRB) issued a decision in a case called Browning-Ferris that essentially rewrote the joint employer standard. The Board’s new standard reflects the legal theory most closely associated with former Wage and Hour Administrator David Weil, who 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.
In other words, under the expanded joint employer theory, the government can hold millions of businesses liable for the management and treatment of workers they don’t actually employ or control. The new standard could extend liability from individual franchises to brand name companies, from subcontractors to larger employers, and potentially even from a vendor or supplier to the company purchasing their products or services.
The new joint employer standard exemplified by the NLRB’s Browning-Ferrisruling exposes numerous businesses to increased liabilities and frivolous litigation. And as the U.S. Chamber warned at the time, an expanded theory of joint employment has been applied under other laws, such as the Fair Labor Standards Act and the Occupational Safety and Health Act.
As one witness testified at the hearing, all of these laws use a hodge-podge of varying standards to establish joint employment liability. In fact, that witness noted that “under just [three] federal statutes, national employers will confront at least 15 different joint employment tests.” Unfortunately, Democrat members of the committee and one of their witnesses seemed unpersuaded by such testimony and accused the business community of stirring up a “lobbyist manufactured tempest in a teapot.”
In response, witnesses from the employer side made clear that the new joint employer standard has created enormous uncertainty. The director of franchise development for a restaurant business in New Orleans testified that small businesses like his “are truly confused and impeded by the inconsistent, expanding joint employer standard that has come out of Washington, D.C.” The chief operating officer of franchise brands for a large franchisor refuted the notion that this is a manufactured issue, saying, “[t]hese evolving standards have negatively impacted our ability to help franchisees grow and bring jobs and economic opportunity to their communities.”
Legislation that codifies the “direct and immediate” control standard for joint employment, which existed for over 30 years prior to Browning-Ferris, would go a long way toward restoring much-needed stability in this area of the law. Fortunately, the House is expected to introduce such a bill in the near future.