Five US lawmakers, including four Republicans and one Democrat, have introduced a bill that would change the National Labor Relations Board’s definition of “joint employers,” reversing a policy pursued by the previous administration to broaden the scope of joint employer liability. This reversal would make organizations less vulnerable to litigation related to wage and hour violations by intermediaries such as franchisees, contractors, or temp agencies, Allen Smith explains at SHRM:
The Save Local Business Act would amend the National Labor Relations Act to state, “A person may be considered a joint employer in relation to an employee only if such person 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).”
The NLRB’s Browning-Ferris decision in 2015 established a precedent for “joint employer” to include entities with which a business has indirect control, or a horizontal relationship, making them responsible for franchisees’ or contractors’ compliance with the Fair Labor Standards Act and other employee protection laws. Previously, a company was only liable for those under its direct control—a standard to which this bill would return.
In January 2016, the Obama Labor Department’s Wage and Hour Division issued an administrator’s interpretation declaring that it considered joint employer regulations applicable to both “vertical” joint employment (when one company hires another that hires an employee in turn) and “horizontal” arrangements “where the employee has employment relationships with two or more employers and the employers are sufficiently associated or related with respect to the employee such that they jointly employ the employee.”
The current administration’s Secretary of Labor, Alexander Acosta, had expressed support for this change during his confirmation hearing in March and, in June, officially rescinded two pieces of guidance issued by Obama’s administration on the matter. Congress taking action will certainly please the National Restaurant Association, International Franchise Association, and a host of small business advocates who had been pushing for legislative action. The lead sponsor of the bill, Rep. Bradley Byrne, R-Ala., believes President Donald Trump will surely sign it into law if it passes both houses of Congress.