LABOR POLICY - November 10, 2017 - Roundtable Weekly

House Passes Bill to Overturn NLRB’s “Joint Employer” Ruling

The U.S. House of Representatives on Tuesday passed a bill to prohibit the National Labor Relations Board (NLRB) from implementing its expanded "joint employer" rule, which broadens the circumstances under which businesses can be held liable for workplace violations committed by their franchise operators, contractors, or vendors.

  2017_11_07 Joint Employer CDW Support Letter

The Real Estate Roundtable joined a coalition of approximately 180 trade organizations in a letter supporting the bill (H.R. 3441), sent to all House members

The Save Local Business Act (H.R. 3441) passed by a vote of 242-181, with eight Democrats joining Republicans. (The Hill, Nov. 7)

The day before the vote, The Real Estate Roundtable joined a coalition of approximately 180 trade organizations in a letter supporting the bill sent to all House members.  “Without a congressional solution, businesses of all sizes will continue to be exposed to unlimited and unpredictable joint employment liability,” the coalition letter states.

The previous federal labor standard (in effect for more than thirty years) held that two separate employers are “joint employers” only if both have “direct and immediate control” over employment terms and working conditions – e.g., both employers share responsibilities for hiring and firing, setting work hours, issuing direction to employees, determining compensation, and handling day-to-day record keeping.

Yet the NLRB upended this precedent in 2015 when it issued its decision in Browning-Ferris Industries of California, Inc.  Browning-Ferris replaced the “direct and immediate control” standard for determining joint employer with an expanded, vague test based on “indirect” and “potential” control over workers’ terms and conditions of employment.  The NLRB subsequently referenced the ruling in labor rights violation cases against McDonald's Corp., arguing the “parent company” was responsible for workplace actions taken by its independent franchisees.  (Roundtable Weekly – April 10, 2015).

This week's coalition letter refers to Browning-Ferris, explaining: “The decision has created immense uncertainty and undermined the relationships between a brand company and local franchise business owners, contractors and subcontractors, and businesses and their suppliers and vendors – all of which have created millions of jobs and allowed hundreds of thousands of individuals to achieve the American Dream of owning their own small business.”

  2017_Katherine Lugar

Katherine Lugar, president and CEO of the American Hotel & Lodging Association, said, "We are pleased the House passed this common-sense legislative fix to give small business owners the clarity and certainty they need and spur economic growth."

The House bill would amend the National Labor Relations Act and the Fair Labor Standards Act to restore policy that existed before Browning-Ferris. Under H.R. 3441, a company is only considered a joint employer if it "directly, actually and immediately" has control over essential terms and conditions of employment.

Responding to the House passage of H.R. 3441, Katherine Lugar, president and CEO of the American Hotel & Lodging Association, said, “Today’s vote is a win for the small business owners and entrepreneurs who represent three out of every five lodging businesses across the U.S., and the millions of men and women they employ. We are pleased the House passed this common-sense legislative fix to give small business owners the clarity and certainty they need and spur economic growth.”  (AHLA, Nov. 7)

Michael Layman, executive director of the Coalition to Save Local Businesses (CSLB) stated, “Full House passage of the Save Local Business Act means local businesses are one step closer to having needed clarity and certainty on joint employer. We are hopeful that the Senate will build upon the progress we have seen in the House and take action soon.”  (CSLB, The Facts on Joint Employer)

In the Senate, the legislation’s fate is uncertain.  Senate Health, Education, Labor and Pensions (HELP) Committee Lamar Alexander (R-TN) said in a Nov. 7 statement: “Today’s House passage of the Save Local Business Act is good news for the owners of this country’s 780,000 franchise businesses – health clubs, barber shops, neighborhood restaurants – who saw their path to the American dream threatened … I look forward to the Senate acting as soon as possible on behalf of every man and woman in this country who wants to realize the American dream of owning a small business.’”

In the courts, Browning-Ferris was appealed to the U.S. Court of Appeals for the D.C. Circuit, where oral arguments were held March 9 and a ruling is pending.  In the Supreme Court, a petition to hear a separate case (DirectTV LLC v. Hall) under the Fair Labor Standards Act  involving joint employment is pending consideration.

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