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Update: U.S. House Passes Save Local Business Act To Restore Joint Employment Standard Of Actual Control

Published by on December 13, 2017

While enactment remains far off, Congress has taken a significant step toward overturning the NLRB’s Browning-Ferris decision with this new bill.

On November 7, 2017, the U.S. House of Representatives passed H.R. 3441, the Save Local Business Act. As we have written before, the Save Local Business Act is a legislative response to the National Labor Relations Board’s 2015 Browning-Ferris Industries decision, which drastically expanded the NLRB’s standard for joint employment.

On August 27, 2015, the NLRB held that it would apply a new standard for finding joint employment. The new standard focuses not only on direct control exerted by the putative employer, but would also consider unexercised, reserved power to control workers as well as indirect control. The Board held:

We will no longer require that a joint employer not only possess the authority to control employees’ terms and conditions of employment, but also exercise that authority. Reserved authority to control terms and conditions of employment, even if not exercised, is clearly relevant to the joint-employment inquiry. . . . Nor will we require that, to be relevant to the joint-employer inquiry, a statutory employer’s control must be exercised directly and immediately. If otherwise sufficient, control exercised indirectly—-such as through an intermediary—-may establish joint-employer status.

The decision was appealed to the U.S. Court of Appeals for the District of Columbia Circuit, which has already heard oral argument in the appeal and is expected to soon issue a decision.

The Board’s new standard greatly expands the likelihood that a standard business arrangement may now be found to create an employment relationship. Particularly threatened are franchisors, who may be argued to indirectly control employees by overseeing franchisee brand maintenance and quality control, and often reserve the right, in the franchise agreement, to reclaim a franchise for violations of the agreement or law.

The Save Local Business Act seeks to nullify the Browning-Ferris decision and restore the previous standard for joint employment requiring the exertion of actual control. The Act would amend the National Labor Relations Act to include the following language in the definition of “employer”:

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 bill was passed by the House by a vote of 242—-181. Although every Republican voted in favor of the bill, only eight Democrats joined them. The bill now proceeds to consideration by the Senate.

Welter Insight

While passage in the House is encouraging, the future of the Save Local Business Act is far from certain. Supporters of the bill were likely disappointed by the lack of bipartisan support found in the House. While such support was not needed for its passage there, it will be necessary to avoid the 60-vote threshold for a filibuster in the Senate. With the Senate more narrowly split, with the Republicans controlling the chamber with just 52 votes, eight Democrats will need to support the bill for it to have any chance of passing. Employers should remain wary of the Browning-Ferris decision while this legislation remains pending and until the D.C. Circuit issues its opinion in the appeal.

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