Employment Law Daily ‘Save the Local Business Act’ advances with its new joint-employer standard
Friday, October 6, 2017

‘Save the Local Business Act’ advances with its new joint-employer standard

By Pamela Wolf, J.D.

On October 4, 2017, by a vote of 23-17, the House Committee on Education and the Workforce gave a thumbs up to the Save Local Business Act, which would clarify what constitutes a “joint employer” in a manner that sponsors believe will provide certainty and stability for both employers and workers. The move followed a markup of the bill, H.R. 3441.

Rolling back NLRB revised standard. The legislation, which enjoys some bipartisan support, would roll back the revised joint-employer standard set out in the 2015 3-2 Browning-Ferris Industries decision, in which the NLRB returned to its pre-1984 standard for determining joint-employer status under the NLRA. The Board announced that it would no longer require that a joint employer not only possess the authority to control employees’ terms and conditions of employment, but also exercise that authority. The Board also dropped its requirement that to be relevant to the joint-employer inquiry, a statutory employer’s control must be exercised directly and immediately. If otherwise sufficient, control exercised indirectly—such as through an intermediary—may establish joint-employer status under the revised standard. The net effect of the Board’s decision was to make finding joint employer status easier.

New standard would be legislated. Under H.R. 3441, joint employment would be found only where a person (which includes employers and their agents) “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).”

Would it really help local businesses? In September, the House Education and the Workforce Subcommittee on Workforce Protections and the Subcommittee on Health, Employment, Labor, and Pensions held a joint legislative hearing to examine the Save Local Business Act. At that hearing, Michael Rubin, Partner at Altshuler Berzon LLP, said, “The proposed narrow definition of ‘joint employer’ would have seriously negative impacts on workers and on small business owners. [H.R. 3441] would also leave small business owners in the untenable position of facing the risk of being held solely responsible for labor law compliance and collective bargaining even when they lack the authority or means to fulfill that legal responsibility. . . I am convinced that H.R. 3441 will [not] benefit local businesses.”

End of joint-employer responsibility? The practical impact of the bill would be “to eliminate joint-employer responsibility under the NLRA and FLSA altogether,” according to Rubin. He explained that the proposed definition of “joint employer” under the bill “so dramatically narrows the common law standard under the NLRA, and the ‘suffer or permit’ standard under the FLSA, that it will prevent any entity, other than the direct employer itself, from being a ‘joint employer.’” The result would be that H.R. 3441 would “effectively overrule hundreds of court decisions, going back to well before the Supreme Court’s first major joint-employer decision in 1947, which held that a slaughterhouse owner was the statutory employer of the meat deboners it hired through an independent staffing contractor.

Helping employers grow, certainty for workers. In contrast, the proponents of the bill anticipate a very positive impact if the legislation is enacted. “This legislation empowers workers to succeed and employers to grow,” Committee Chairwoman Virginia Foxx (R-N.C.) said in a release. “Workers deserve certainty and stability, and small and local businesses need clear rules of the road to follow in order to create jobs in their communities.”

“Today our committee sent a clear message that we are standing up for American workers and job creators,” said Rep. Byrne (R-Ala.). “The Save Local Business Act is all about eliminating uncertainty for workers and protecting small businesses throughout the United States.”

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