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House of Representatives Passes Legislation to Rein In National Labor Relations Board’s Expansive Ruling on Joint Employer Liability

11/20/2017

On November 7, 2017, the House of Representatives voted to pass the “Save Local Business Act” (H.R. 3441). The Save Local Business Act was introduced by Representative Bradley Byrne (R-AL) and is a direct counter to the National Labor Relations Board’s controversial landmark 2015 ruling in Browning-Ferris Industries, which greatly expanded joint employer liability for businesses. Many business owners feel that Browning-Ferris amounted to a vast overreach by the Board and are concerned that the ruling will threaten the economy by forcing companies to cut back on joint operations of all sorts, especially franchising arrangements, since franchisers will be legally liable for franchises even when the franchises are separate businesses. If passed, the Save Local Business Act will significantly limit the extent to which employers could be held responsible for the actions of outside franchisees, joint venture partners, and contractors.

In Browning-Ferris, the NLRB determined that an employer has sufficient control over another entity’s workers to be considered a joint employer not only if it exercises control over the terms and conditions of their employment, but also if it has merely “reserved the authority to do so.” Thus, the NLRB held that a company that has “indirect” or “potential” control over the employees of another company may be considered a joint employer of those employees. This new standard significantly altered the determination of when a company qualified as a joint employer, including--but certainly not limited to--franchisor-franchisee or contractor-subcontractor relationships. Browning-Ferris has appealed to the D.C. Circuit Court of Appeals which has yet to rule.

The Save Local Business Act would restore the traditional joint employer standard as the law of the land. An employer would be a joint employer under the Save Local Business Act only if it “directly, actually, and immediately, and not in a limited and routine manner, exercises significant control over essential terms and conditions of employment.” Such terms and conditions explicitly include “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.” Under the Save Local Business Act, determining common marketing or operation strategies would not extend employer liability to an independent entity responsible only for these overarching general strategies or policies.

The Save Local Business Act now moves to the Senate and will require broad bi-partisan support to pass. At the same time, employers are awaiting the D.C. Circuit Court of Appeals’ decision in the Browning-Ferris appeal, which will shed further light on the scope of joint employer liability.