House Republicans took a major step toward killing an Obama-era policy Tuesday, passing legislation aimed at better defining the law it was built upon.
The Save Local Business Act clarifies joint-employment. The business community expressed particular concern over changes made to the rule during the last administration. Critics argue the changes overstepped the intent of the rule and burdened franchises and other businesses that contract together with legal risk.
The National Labor Relations Board (NLRB), the agency tasked with overseeing labor dispute cases, started the current debate by changing how it ruled on joint-employment cases. The joint-employer standard determines whether an employer is legally responsible for the employees of a company it contracts with. Employers take on a lot of legal burdens and potential costs when they become joint-employers.
The joint-employer standard was previously determined based on whether a company had direct control over the employment policies, such as wages and the hiring process, of another company. The updated standard is instead determined based on what is known as indirect control, which the business community argued is overly vague.
The new legislation would essentially rollback the updated standard by affirming that businesses can only be declared joint-employer if they exercise direct control over the same set of employees. It also aims to address the patchwork of legal interpretations that have emerged over the years from different federal agencies and courts applying their own interpretations.
Former President Barack Obama oversaw several significant changes to labor law; the updated joint-employer standard was among the most significant. The business community denounced the change as a dangerous federal overreach. The NLRB defended it as an update aligned with the law’s intent.
The NLRB revisited the joint-employment standard during a handful of labor dispute cases in recent years. A labor dispute case involving Browning-Ferris Industries set the precedent for the new standard in 2015, and the NLRB was able to change the joint-employer standard by altering how it ruled on related cases.
The NLRB’s decision to update the standard is potentially far-reaching, given the vast number of business that contract together. The franchise model, for instance, relies on large brand names contracting with many smaller and independently owned businesses: McDonald’s is not one company but rather many contracting under the same corporation.
The Coalition to Save Local Businesses (CSLB) has been at the forefront of the opposition since the update roughly three years ago. Coalition members have spoken with lawmakers, launched media campaigns, testified before Congress, supported lawsuits, and backed opposition efforts from the business community.
The International Franchise Association (IFA) led the coalition alongside other industry groups. The U.S. Chamber of Commerce and IFA, both coalition members, launched an ad campaign Nov. 3 urging lawmakers to pass the legislation in the most recent effort intended to underscore the dangers of the updated rule.
The Senate will also need to pass the bill before it can be signed by President Donald Trump. The NLRB is likely to reverse the updated standard anyways if given a relevant case in which to rule on. Trump changed the dynamic of the five-member board by appointing two new members and a new chairman. His pick to lead the Department of Labor, Secretary Alexander Acosta, has already withdrawn from an earlier informal guidance upholding the new standard.
The updated joint-employer standard still has its defenders. The Economic Policy Institute claimed, shortly after the bill was first introduced, that it would make small businesses responsible for business practices often mandated by large corporations. The Teamsters argued in an email to its members Nov. 2 that the bill would leave many workers with no protections when their employers violate wage laws or their rights to organize.