House Committee Reviews Joint Employer Standard

At issue is the newer definition of ‘joint employer,’ meaning that franchisors and contractors may be liable for the labor practices of their franchisees and subcontractors.

October 01, 2015

WASHINGTON – On Tuesday morning, the House Committee on Education and the Workforce Subcommittee on Health, Employment, Labor and Pensions held a hearing on a proposal to roll back a recent National Labor Relations Board (NLRB) decision related to when an employer can be considered a “joint employer” for purposes of the National Labor Relations Act (NLRA).

Last month, the NLRB adopted a more expansive definition of “joint employer” under the NLRA. Under the new standard, adopted in a case against Browning Ferris Industries, the NLRB rejected the requirement that a joint employer possess and exercise “direct and immediate control” over terms and conditions of employment, ultimately finding that simply possessing the authority to control terms and conditions of employment, even if that authority is never used, is sufficient.

Under the new definition, employees may have the ability to directly bargain not just with the company for which they work, but with a company that contracts with their employer.  The new definition also means that franchisors and contractors may be liable for the labor practices of their franchisees and subcontractors.

The subcommittee hearing examined the NLRB’s recent decision in Browning Ferris, and it discussed the Protecting Local Business Opportunity Act (H.R. 3459), a bill introduced by Committee Chairman John Kline (R-MN). Identical legislation to H.R. 3459 has been introduced in the Senate by Senate Health, Education, Labor, and Pensions Committee Chairman Lamar Alexander (R-TN). The legislation reaffirms the traditional standard that an employer must have “actual, direct, and immediate” control over an employee to be considered a joint employer. The witnesses included academics, small business owners, and a former member of the NLRB.

Subcommittee Chairman Phil Roe (R-TN) began the hearing by emphasizing the implications of the NLRB’s decision, which “blurred the lines of responsibility for decisions affecting the daily operations of countless small businesses, including the nation’s 780,000 franchise businesses and countless contractors, subcontractors, independent subsidiaries, and more.” Committee Republicans agreed with Poe’s sentiment and made a point to ask the small business owners about their largest concerns, which include the case-by-case standard of review, the practical difficulties imposed by the joint employer designation, and the uncertain future of how the Browning Ferris decision will impact the franchisor-franchisee relationship. 

However, Democrats on the subcommittee, with the support of the two academic witnesses, vehemently disagreed. They argued that the impact of the Browning Ferris decision has been exaggerated both because the decision has no stated impact on the franchisor-franchisee relationship and is consistent with the common law and the statutory language. In their questioning, the Democrats focused on the potential for the legislation to negatively impact the rights of workers to collectively bargain by effectively establishing a broad loophole for companies to hide behind to avoid negotiating with their employees. At the close of the hearing, Subcommittee Ranking Member Jared Polis (D-CO) remarked that while no one on the committee wants to make it harder for smaller businesses to succeed, now is an inopportune time to “prejudge the NLRB’s motives or undermine its authority.”

Click here for a members-only discussion of the Board’s Browning-Ferris decision, including the new joint employer standard, the scope of the decision, and the how it will impact NACS members.

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