Bill to Clarify Joint Employer Standard Advances

November 4, 2015

pic-nlrb-laborOn Oct. 28, the House Education and the Workforce Committee, chaired by Rep. John Kline (R-Minn.), approved H.R. 3459, the Protecting Local Business Opportunity Act. The legislation is intended to protect small businesses and their employees by rolling back the National Labor Relations Board’s (NLRB) recent Browning-Ferris Industries decision redefining what it means to be an employer. The bill passed the committee by a party line vote of 21-15.

As passed by the committee, H.R. 3459 will revise the National Labor Relations Act to state that two or more employers may be considered joint employers only if each has “actual, direct, and immediate” control over essential terms and conditions of employment.

For more than 30 years, the NLRB considered two or more employers “joint employers” if they had “actual,” “direct,” and “immediate” control over essential terms and conditions of employment. This joint employer standard has protected small businesses from liability involving employees over which they do not have actual or direct control. As a result, franchisors and franchisees or contractors and subcontractors were not considered joint employers because each employer directed the daily operations of his or her own separate business.

However, in August 2015, NLRB issued a decision that redefines the NLRB’s standard for determining joint employer status, which requires companies to participate in union negotiations and could potentially make them liable for their subcontractors’ employment actions. In the 3-2 ruling, the NLRB found that Browning-Ferris Industries (BFI) of California, which operates a recycling facility and staffing agency Leadpoint, which supplies employees for cleaning and sorting, are joint employers.

Under the standard used by the NLRB, companies can be considered joint employers if they “share or codetermine those matters governing the essential terms and conditions of employment.” In their decision, the NLRB pointed to indirect and direct control that BFI possessed over those matters for Leadpoint’s workers, including wages and hours, scheduling, overtime and determining the manner and method of work performance.

H.R. 3459 and Senate companion bill, S. 2015, will guarantee small-business owners and their employees will not be threatened by the recent NLRB decision and will instead restore the decades old joint employer standard used to determine whether two separate companies are considered one employer with respect to a group of employees for purposes of liability and bargaining obligations under the National Labor Relations Act.

During the markup, several amendments were offered by committee Democrats; however, all were ruled non-germane by the Chairman. The bill now awaits House floor action and most Democrats on the committee predicted the measure would be vetoed if it ever reached President Barack Obama’s desk.