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Legislative Protection Of Joint Employment Analysis Under Consideration By Congress

Published by on November 16, 2017

The Save Local Business Act would provide a statutory fix to the NLRB’s Browning-Ferris decision and restore a proper joint employment analysis.

Currently pending before the U.S. Congress is a piece of legislation that could greatly benefit many franchises. The bill, H.R. 3441, the Save Local Business Act, was introduced by Rep. Bradley Byrne (R-AL) on July 27, 2017, and referred to the House Committee on Education and the Workforce. Encouragingly, the Act has garnered the support of 80 cosponsors and received hearings in the Subcommittee on Health, Employment, Labor, and Pensions.

The Act would amend the National Labor Relations Act (“NLRA”) 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 Act comes in response to the National Labor Relations Board’s 2015 Browning-Ferris Industries decision, which redefined the Board’s standard for joint employment, holding that a parent company or franchisor will be considered a joint employer even if it only reserves the right to exercise indirect control over an employee but has not done so. Prior to the decision, a company was required to actually control an employee to be a joint employer. Many anxiously await a decision by the U.S. Court of Appeals for the District of Columbia Circuit, which has already heard oral argument in the appeal of this decision. The amended definition of “employer” proposed by the Act would return the NLRB’s joint employment analysis to the actual control standard used before Browning-Ferris Industries.

The shift by the NLRB on joint-employer status is troubling for franchisors and franchisees alike, and threatens the franchising model itself. Franchises allow franchisors to be in the business of selling a brand and business model in exchange for royalties and decreased exposure. Franchisees, on the other hand, rightly view themselves as business owners, bearing considerable risks and hoping to realize a profitable investment. By blurring the line and shifting liability back to the franchisor, the NLRB threatens the franchising system by taking away one of the main incentives franchisors have for selling their business model, which will ultimately result in franchisees being denied the opportunity to open their own business.

The Act has the support of the National Federal of Independent Business, the National Retail Federation, the National Restaurant Association, the International Franchise Association, the American Hotel and Lodging Association, the Asian American Hotel Owners Association, the Retail Industry Leaders Association, and the Associated Builders and Contractors, among others.

Several states have also acted to protect franchising. As we have written about before, sixteen states have enacted legislation that codifies, in some form, that a franchisor is not an employer or co-employer of either a franchisee or an employee of the franchisee, unless the franchisor has agreed.

Welter Insight

Joint employment remains an area of law under attack. Despite positive developments, such as the Department of Labor’s recent withdrawal of its prior informal guidance on joint employment, many are still pushing for an expansive view of “employer.” While far from enactment, the Save Local Business Act would provide a crucial protection for franchisors involved in joint employment matters with their franchisees before the National Labor Relations Board.

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