When it comes to federal labor law, businesses are trapped in a maze of uncertainty. Congress can solve this puzzle, letting them focus on growing their businesses and creating jobs.
One of the most damaging and far reaching decisions of the Obama era National Labor Relations Board (NLRB) was the infamous Browning-Ferris Industries (BFI) decision issued in August 2015. It upended the definition of when an employer would be considered a “joint employer” and be found liable for another company's unfair labor practices and breaches of collective bargaining agreements under the National Labor Relations Act (NLRA).
Under BFI, no longer would one employer need actual or direct control over another employer’s terms and conditions of employment to be considered a joint employer. Now they could be a joint employer based merely on indirect and reserved, or potential, control.
BFI overturned 30 years of NLRB precedent. This decision was purely outcome determinative. It was always intended to give unions new opportunities to organize employees previously unavailable to them regardless of the logic or contorted arguments necessary to achieve that goal. The full scope of this definition has yet to be determined.
Dissenting NLRB members Philip Miscimarra and Harry Johnson described it as having “no limiting principle” and predicted it will
subject countless entities to unprecedented new joint-bargaining obligations that most do not even know they have, to potential liability for unfair labor practices and breaches of collective bargaining agreements, and to economic protest activity, including what have heretofore been unlawful secondary strikes, boycotts and picketing.
And most disturbingly, the BFI decision creates massive uncertainty about when two employers will be considered joint employers.
Not only is joint employment under the NLRA now a mess, but the concept also exists in other areas of law. In particular under the Fair Labor Standards Act (FLSA), one employer can be held liable for another employer’s FLSA violations—such as not paying the minimum wage or proper overtime compensation if a joint employment relationship is found. Unlike the BFI decision, the problem under the FLSA is that there are too many decisions. Different federal circuits and state courts have issued confusing and conflicting decisions meaning that employers operating in multiple states do not have a consistent definition guiding them as to when they will be considered joint employers.
Under the BFI decision, if one employer hires a second employer to provide staffing (as were the facts in BFI) or just uses an outside vendor for certain services such as security, IT, payroll, janitorial, etc., the two can be considered joint employers and therefore jointly responsible for unfair labor charges under the NLRA. They can also be forced into union contracts for the other company’s employees.
The NLRB’s decision would not only give unions new opportunity to enmesh small businesses in labor disputes, it may also create a new marketplace for litigation and the trial attorneys who seek a shortcut to deep pockets. Equally as worrisome, the reasoning of the new joint-employer standard could carry over to other labor and employment laws. The Chamber’s 2015 statement to the Senate Health, Education, Labor and Pensions Committee dissects the opinion and discusses its flawed reasoning:
By changing its joint employer standard in BFI, the Board has opened up a Pandora’s Box of problems that may now potentially befall almost any employer who enters into a contract for services with another business.
The decision poses a particularly strong threat in the franchising context where franchisees are, by definition, partners with their parent company. The BFI decision would make that parent company a joint employer with the franchisee, thereby making the franchise business model no longer viable and cutting off opportunities for entrepreneurship and job growth. The Chamber and the International Franchise Association issued a report that describes how disruptive the BFI decision will be.
Against this backdrop of negative impacts, there is now some hope. The Save Local Business Act (H.R. 3441) was introduced at the end of July 2017 with bipartisan support. The bill would very simply and directly restore the meaning of employer that was in place before the NLRB’s decision. It states clearly that one employer can only be a joint employer if he or she
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).
Gone would be the vague, expansive concept of becoming a joint employer based on indirect or potential control. In addition to curing the joint employer problem under the NLRA created by the BFI decision, this bill also applies the same definition to the Fair Labor Standards Act to provide clarity and stability under that law as well, and resolve the difficulties of having multiple definitions throughout the country.
The Chamber has opposed the NLRB’s Browning-Ferris Industries decision at every step, including currently challenging it in federal court. While the courts (or a newly constituted NLRB) might ultimately restore rationality to this area, the Save Local Business Act would be the best solution to undoing this destructive decision as it would unequivocally codify into statute a balanced, and workable definition for joint employment under the NLRA and FLSA.
Editor's note, 9/15/2017: This post was originally titled, "Joint Employer Bill Helps Businesses Escape Labor Law Uncertainty Maze."