Posted November 8, 2017

House passes Joint Employer bill

Bill will restore business protections from potential legal liability for subcontractors they do not employ or control.

The U.S. House of Representatives today approved the Save Local Business Act (H.R. 3441), which would provide a clear definition of “joint employment” under the National Labor Relations Act (NLRA) and the Fair Labor Standards Act (FLSA) if enacted.  More importantly, it would reverse the National Labor Relations Board’s (NLRB) expanded joint-employer theory promulgated in its 2015 case Browning-Ferris.

The Browning-Ferris decision upended well-settled legal principles with regard to joint employment.  For decades, two companies shared liability only if a brand name company or a business that engaged in contracting exerted significant control over the employees of a franchise or subcontractor.  This “direct and immediate” control standard provided clarity for employers and workers.

Browning-Ferris supplanted that clarity with a vague and sweeping standard based on “indirect” control or even the “potential” to control based on the rationale of erstwhile Wage and Hour Division (WHD) Administrator David Weil.  Weil had written extensively about “the fissured workplace” and espoused the idea of holding businesses jointly liable for another party’s employees in business relationships where such liability did not used to exist. 

While in office, Weil issued an “Administrator’s Interpretation” that attempted to use a so-called “economic realities” test to define employment under the FLSA, and the NLRB followed suit using a similar theory to define joint employment under the NLRA by applying it in Browning-Ferris.

As a result of this flawed theory, many businesses face potential legal liability for individuals they do not actually employ and for workplaces they do not actually control. It ensnares businesses such as franchisors that are in reality independent from their individual franchisees, and it could implicate companies that use subcontractors, as well as companies that are the major purchaser of goods or services from a particular vendor or supplier.

Click here to read more.