by Chris Heaton - Vice President for Advocacy and Public Affairs
In the midst of the media and Congress focusing on tax reform and President Trump’s trip through Asia, a relatively harmless looking, one-page bill passed the House on November 7 that could really live up to its name, the “Save Local Business Act”.
The need for this legislation began in 2015 when the National Labor Relations Board (NLRB) turned a long-standing interpretation of “joint employer” on its head, by declaring that Browning Ferris Industries, Inc (BFI) was a “joint employer” with a subcontractor it engaged, Leadpoint Business Services; which provided workers for sorting recycling material.
This was significant because the Teamsters union was attempting to gain collective bargaining for the Leadpoint employees and if it could get BFI declared a joint employer, that would force BFI to the bargaining table, even though it was not the “actual” employer for the Leadpoint employees.
Let me back up and first explain what the NLRB considered “joint employer” prior to 2015. A joint employer relationship existed when two or more employers share and exercise actual, direct and immediate control over essential terms and conditions of employment for workers.
With this narrow definition, very few joint employer relationships were ever determined. During the Obama administration, unions and other advocates began pushing the NLRB and courts to change the “rules” for joint employer determination. Congress began holding hearings on the subject in 2014.
By broadening the definition of joint employer, advocates believe they can help workers gain higher wages and better benefits by minimizing “permatemp” arrangements and minimize or eliminate what some consider the over-use of subcontractors to hold wages and benefits down.
Since the NLRB decision on BFI, the federal courts have taken up other cases involving construction contractors, franchise operations and other companies that use subcontractors to perform work-related duties for their operations. On January 25, 2017 the U.S. Court of Appeals in the Fourth Circuit adopted a very broad definition of joint employment and to see the potential implications for your business, you only need to take a brief look at the facts of that case.
Commercial Interiors subcontracted with J.I. General Contractors for drywall installation on a project. When the employees of J.I. General Contractor sued for overtime wages under the federal overtime laws, they included Commercial Interiors as a joint employer, equally liable for the wage and hour violation.
The Fourth Circuit used a new test to determine joint employer status under Fair Labor Standards Act (FLSA) and ultimately ruled that Commercial Interiors was a joint employer with J.I. General Contractors, making them a co-defendant in a wage and hour lawsuit for employees – of a subcontractor.
Imagine the implications of this determination in your alarm business. You hire subcontractors to perform installations, conduct sales, or any number of other legitimate purposes and now you find yourself liable as a joint employer for actions taken by the subcontractor that you may know nothing about!
Since President Trump was elected, some of the actions taken by the NLRB are being or have been voided with new board members, but a new administration could bring these broad interpretations back and of course, the courts will continue to muddy the regulatory waters given the ambiguous language in statute.
H.R. 3441, the Save Local Business Act was introduced on July 27, 2017 by Subcommittee on Workforce Protections Chairman Bradley Byrne (R-AL). This one page bill places unambiguous language that restores the long-established definition of joint employer by amending the National Labor Relations Act (NLRA) and FLSA to read:
"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 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.’’
H.R. 3441 is now on its way to the Senate. This bill is widely supported and despite being only one page, it is the kind of legislation you need to protect your business. We will continue to keep you informed on the progress.