House passes bill to overturn controversial joint-employer ruling

The House on Tuesday evening passed a bill that would overturn an Obama-era National Labor Relations Board (NLRB) ruling that made companies potentially liable for labor law violations committed by their subcontractors.

The Save Local Business Act, sponsored by Rep. Bradley Byrne (R-Ala.), was approved 242-181 despite pushback from Democrats, who argued the bill gives a free pass to unscrupulous companies that steal wages, fail to pay overtime and break child labor laws. 

Republicans say the activist labor board under the Obama administration created massive confusion when it ruled in 2015 that an employer is considered a joint employer with a subcontractor if it has “indirect” control over the terms and conditions of employment or has the “reserved authority to do so.” 

The bill, which passed the House Monday, would change that definition under the National Labor Relations Act and the Fair Labor Standards Act to state a company is only considered a joint employer if it “directly, actually and immediately” has control over essential terms and conditions of employment. 

“The legislation simply restores a common-sense joint-employer standard,” House Education and the Workforce Committee Chairwoman Virginia Foxx (R-N.C.) said on the floor. 

“And it does so in a way that upholds vital worker protections and ensures all employers know their responsibilities to their employees,” she said. 

But Rep. Bobby Scott (D-Va.) said the legislation provides no guidance as to how many of the nine essential terms and conditions of employment an employer must control to be considered a joint-employer.

“An entity could have control over all nine of the essential terms and working conditions, but if it indirectly exercises that control through an intermediary, such as subcontractor, then the entity would not be an employer because its control is not direct,” he said.

Scott argued the legislation establishes a narrow definition of joint-employer that effectively eliminates accountability for some of the entities calling the shots. 

The International Franchise Association was among the business trade groups that fought hard against the NLRB ruling, claiming it threatened the franchise business model. 

But Scott said the NLRB’s ruling specifically stated it did not cover franchisees. He claimed there hasn’t been a single decision in which a franchisor has been held to be a joint employer with its franchisee under either the National Labor Relations Act or the Fair Labor Standards Act. 

In a statement Tuesday night, International Franchise Association President and CEO Robert Cresanti applauded the House for seeking to reverse a ruling he said was “far too broad.”

“This is the first step in re-establishing a business environment where American entrepreneurs can hire new employees, train existing ones, and unlock the full economic potential of their communities,” he said.

“The franchise model has made the dream of small business ownership a reality for thousands of hard-working families, affording them the opportunity to go into business for themselves, but not by themselves,” Cresanti said. 

Advocates for worker rights slammed the legislation.

In a statement, Celine McNicholas, labor counsel for the Economic Policy Institute, claimed it “robs workers of their rights, making it impossible for them to effectively collectively bargain or litigate workplace disputes.” 

She also said it “leaves small businesses holding the bag when the large corporations that control their business practices and set their employees’ schedules violate labor law and refuse to come to the bargaining table.”