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Houses Passes Bill Which Would Narrow Definition of “Joint Employer”

November 15, 2017
Carlos Pastrana

On Tuesday, November 7, the U.S. House of Representatives passed, by a vote of 242-181, the “Save Local Business Act”, which would narrow the National Labor Relations Act’s and Fair Labor Standards Act’s definitions of “employer” and, in so doing, is aimed at overturning the National Labor Relations Board’s joint employer ruling that made companies and franchisors potentially liable for labor law violations committed by their subcontractors or franchisees.

The Bill specifically provides that two or more employers may only be considered “joint employers” to the extent that they “directly, actually, and immediately, and not in a limited and routine manner, exercise[e] significant control over essential terms and conditions of employment, such as 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, or administering employee discipline.”

This Bill is the second legislative effort to overturn the joint employer standard set forth by the NLRB in Browning-Ferris Industries of California, Inc. v. NLRB, 362 NLRB No. 186 (Aug. 27, 2015), which overturned more than thirty years of precedence by affirming that a company could be considered a “joint employer” if it possessed sufficient control over employees’ essential terms and conditions of employment, including hiring, firing, supervision, scheduling and the means and method of employment.

This is, in effect, a much broader definition than the one previously applied by the NLRB. Prior to Browning-Ferris, the NLRB determined whether two separate entities should be considered joint employers by analyzing if they co-determined the essential terms and conditions of employment in an “actual, direct and immediate” manner. Browning-Ferris sought Federal Court review of the NLRB’s decision, and oral arguments were heard on March 9, 2017, but a decision has not been rendered yet.

Although, it is unlikely that the Bill passed by the House last week will pass the Senate and become law, it does appear that re-defining the joint employer relationship is a priority for Congressional Republicans, and it is more likely that the newly-constituted NLRB, which is more employer-friendly, will eventually overturn Browning-Ferris and give employers more certainty that the mere existence of a franchisor-franchisee relationship will not expose them to liability.

This article is a publication of MWH Law Group LLP and is intended to provide general information regarding legal issues and developments to our clients and other friends. It should not be construed as legal advice or a legal opinion on any specific facts or situations. For further information on your own situation, we encourage you to contact the author of the article or any other member of the firm.

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Carlos R. Pastrana
Partner, Milwaukee
735 N. Water Street, Suite 610, Milwaukee, WI 53202

P: (414) 436-0353 / F: (414) 436-0354
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