HR Management & Compliance

New bill latest effort to tackle definition of joint employment

NLRB logoThe definition of “joint employment” may be heading for another turnaround. Legislation introduced in Congress on July 27 takes aim at a 2015 National Labor Relations Board (NLRB) decision that raised the ire of many in the business community, especially employers that work with franchisees, contractors, and staffing agencies.

The NLRB’s 2015 Browning-Ferris decision broadened the joint-employment standard so that a business that exercises only indirect control over another employer’s workers still can be considered a joint employer for purposes of collective bargaining. The new bill introduced in the House—dubbed the Save Local Business Act—seeks to clarify the joint-employment standard and provide relief to businesses that are in a relationship with another employer.

“The business community is going to rally around this bill because it promises a return to clarity,” said Sean D. Lee, attorney with Fortney & Scott, LLC in Washington, D.C., and a frequent contributor to Federal Employment Law Insider. “And employers need that clarity to develop effective workplace practices, promote compliance, and . . . understand liabilities that can arise from business models like contracting and franchising.”

Lee said the Browning-Ferris decision “upended clear, settled standards” employers once relied on to determine when they could be considered joint employers. “We’ll see this bill touted as a return to a commonsense definition of joint employment that’s based on an established body of law,” he said.

Bill’s limits

The bill may not provide the “clarity” many in the business community want, according to JW Furman, attorney with Lehr Middlebrooks Vreeland & Thompson, P.C., in Birmingham, Alabama, and a frequent contributor to Alabama Employment Law Letter. The bill affects the National Labor Relations Act (NLRA) and the Fair Labor Standards Act (FLSA) without mentioning any of the antidiscrimination laws enforced by the Equal Employment Opportunity Commission (EEOC), she said. She added that the EEOC “has consistently used the most liberal definition of ‘joint employer’ of any of the federal agencies that deal with employment.”

Even if the bill becomes law, the EEOC’s interpretation will stand for now, and the NLRB’s expanded definition under Browning-Ferris matches the EEOC’s interpretation, Furman said. But the bill is encouraging for employers, she said, because it would protect some companies from liability for violations of the FLSA and the NLRA. She also pointed out that some of the EEOC’s legal interpretations may change as Republicans gain a majority on the commission.

As for the bill’s prospects for passage, Lee is optimistic that it will eventually be signed into law. “What’s being considered here is not radical,” he said. If the bill becomes law, it will return to the definition used for decades before the Browning-Ferris decision, he said.

Other joint-employment issues

Other developments affecting joint employment also bear watching, Lee said, since the Browning-Ferris decision is being appealed. Also, the makeup of the NLRB is likely to change soon since President Donald Trump has nominated Republicans for two open seats on the Board.

The nominees, Marvin Kaplan and William Emanuel, have advanced out of committee and, if confirmed by the Senate, will give Republicans control over the five-member Board for the first time in a decade. Lee points out that the new Board may revisit the Browning-Ferris decision.

The 2015 decision dealt with collective bargaining, but joint employment exists in other contexts as well, said Angela N. Johnson, an editor of Indiana Employment Law Letter and attorney with Faegre Baker Daniels LLP in South Bend. For example, if a franchisee fails to pay employees appropriately under the FLSA, the franchisor also could be liable, depending on the level of control it exercised in the employment relationship.

“The issue with joint employment is that it loops in a purported ‘employer’ that may have only had indirect control in the employment relationship, whereas the franchisee was actually making the employment decisions and dealing directly with the employee,” Johnson said.

With the expanded definition of “joint employment,” employees and their attorneys “are able to reach into deeper pockets,” Johnson said. “Even more, having the ability to name as a codefendant a national franchisor makes class action suits more achievable.”

Johnson said the broader definition of joint employment has caused franchisors to refrain from exercising oversight of the employment relationship out of fear that if too much control is exercised, they will be deemed joint employers.

“That can mean, as a practical matter, that now franchisees, who are essentially small businesses, no longer have the services and support previously provided by the franchisor,” Johnson said. “For instance, they may now have to calculate their own payroll and provide health insurance. This also means employees lose out on the benefit of a larger or better health plan that was previously sponsored by the larger franchisor.”

Johnson points to recent reports that Microsoft has withdrawn its policy of requiring contractors to provide paid sick leave to employees since the policy might constitute enough control to require Microsoft to negotiate with a union under the Browning-Ferris definition of joint employment.

Issue to watch

Even if the new bill isn’t successful, Johnson says the issue is one to watch in the next year. The U.S. Department of Labor (DOL) recently withdrew its Obama-era guidance on joint employment, “signaling a more ‘pro-employer’ shift,” she said. Also, in the coming months, the U.S. Supreme Court will decide whether it will hear a joint-employer case under the FLSA.

Johnson also pointed out that states are taking steps to define joint employment. She said New Hampshire Governor Chris Sununu last week signed into law a measure aimed at clarifying the Browning-Ferris decision by defining the employer relationship to reduce the likelihood that a franchisor will be deemed a joint employer under New Hampshire law.

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