House Committee Marks Up Bill Limiting the Definition of Joint Employer

The National Labor Relations Board had sought to expand the definition, which might have altered franchisor-franchisee relationships.

October 29, 2015

WASHINGTON – Yesterday, the House Committee on Education and the Workforce convened to mark up the Protecting Local Business Opportunity Act (H.R. 3459). The bill, introduced by Committee Chairman John Kline (R-MN), seeks to roll back the National Labor Relations Board’s (NLRB) recent decision to expand the definition of a “joint employer” under the National Labor Relations Act (NLRA).

The expanded definition of “joint employer” could have significant impacts on the franchisor-franchisee or the business-contractor relationship. If a franchisor is considered a “joint employer” of its franchisee’s employees, then the franchisor can be liable for labor law violations committed by its franchisee, and the employees can unionize (with the union not only applying to the franchisee but also to the franchisor). The same is true of the business-contractor relationship. Those legal responsibilities have the potential to not only create liability but also to fundamentally alter the relationships of these businesses.

In late August, the NLRB released its decision in a case against Browning Ferris Industries in which the NLRB expanded the definition of “joint employer” under the NLRA. Under the new standard, the NLRB found that simply possessing the authority to control the terms and conditions of employment, even if that authority is never used, is sufficient for a company to be designated a “joint employer.” Rejecting the requirement that a joint employer possess and exercise “direct and immediate control” over the terms and conditions of employment, this new definition creates ambiguity in the role that employers must play in collective bargaining agreements and the relationships between franchisors, franchisees, contractors and subcontractors.

Kline’s legislation seeks to reaffirm the traditional standard that an employer must have “actual, direct, and immediate control” over an employee to be considered a joint employer. In his opening statement, Kline explained that the NLRB’s decision has potentially grave consequences for the country’s small-business owners because “[l]arger businesses will begin exerting greater control over small businesses. If they are legally liable for the decisions of their smaller partners, they will have no choice but to demand a greater role in how those small businesses operate. Or they might stop doing business with local employers altogether.” Many of his Republican colleagues agreed, believing the new standard to be too indefinite, leaving many small businesses and their owners confused about its potential impact.

Committee Democrats, on the other hand, were quick to argue that this legislation is premature as the NLRB’s new standard is unlikely to apply to most franchisor-franchisee relationships. They also expressed concerns that this bill, which one member remarked was a “blunt response to a complex issue,” would seemingly undermine collective bargaining and other protections for hardworking employees. To show their dissatisfaction with the legislation, five Democrats on the panel, Reps. Jared Polis (D-CO), Mark Pocan (D-WI), Frederica Wilson (D-FL), Suzanne Bonamici (D-OR) and Katherine Clark (D-MA), offered amendments during the course of the markup that would strike the text of the bill and replace it with text from bills that Democrats have introduced to strengthen worker rights and protections. All of the amendments were rejected by the Republicans on procedural grounds.

Despite the attempts made by Democrats to alter the form and function of the legislation, the bill advanced out of committee by a 21-15 party line vote, with all Republicans voting in favor and all Democrats voting against the bill. Following the markup, Committee Ranking Member Bobby Scott (D-VA) explained that while the bill may pass through the House, it is unlikely to survive in the Senate and would eventually face a presidential veto.

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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