The Save Local Business Act and Joint Employer Status

Rep. Bradley Byrne (R-AL), Chairman of the Subcommittee on Workforce Protections and members introduced the “Save Local Business Act” (H.R. 3441) on July 7, 2017 in an effort to undo the 2015-2016 joint-employer rulings.  These rulings changed the landscape of how joint-employer status is determined. The recent rulings shifted the precedent of “direct” control to “indirect” control to determine joint-employer status. The act aims to reshift the definition of employer back to “direct control” in the National Labor Relations Act (NLRA), and the Fair Labor Standards Act (FLSA).

In respect to the NLRA modification, the “Save Local Business Act” defines the term “employer” as having “direct, actually, and immediately, and not in a limited routine manner, exercises significant control over the essential terms and conditions of employment.”.  The act also proposes changes to the definition of “employer” in the FLSA. The verbiage states, “A person may be considered a joint employer in relation to an employee for purposes of this Act only if such person meets the criteria set forth in section 2(2)(B) of the National Labor Relations Act (29 U.S.C. 152(2)(B)).”. The bill comes after the Department of Labor’s (DOL) press release stating a rollback of the definition of employer. 

The Trump administration has taken steps including the DOL announcing rolling back Obama era interpretation of joint employer in order to address joint-employer status. In a press release on June 7, 2017, U.S. Secretary of Labor, Alexander Acosta, announced a withdraw from the DOL’s 2015-2016 informal guidance on joint employer status and independent contractors. With this reversed interpretation the traditional and localized employment standard of “direct and immediate” is to be put back in play. However, the sponsors of H.R. 3441 conclude legislation is needed to solidify issues surrounding determining joint-employer status so businesses can continue to operate without uncertainty, and to prevent future federal involvement. The guidance of the Trump administration to fall back to direct control interpretation has been declared a win for companies like McDonald’s, but not for the other side of the coin. The prominent Fight for $15 (#Fightfor15) movement finds this determination a setback in their efforts for higher wages. While companies believe they have a better understanding and clarity of joint-employer status with the Trump administration decree, employee groups such as the Fight for $15 see this as a hurdle to unionize or to collectively bargain.

Currently, there are 43 bipartisan co-sponsors of the “Save Local Business Act”. The bill argues that the “indirect control” decision and standard impedes independent business owners’ freedoms and job creation. The Committee on Education and The Workforce website states the changes they believe the bill will provide. These include restoring the definition of employer to actual and direct, restoring faith in franchise business, and bringing a more certain and predictable future. Under the new provisions of the H.R. 3441 the courts and regulators would have to look at who exerts control over the following activities: hiring and firing of employees, assigning work schedules, positions, and tasks, setting employee pay rates and benefits, administering employee discipline, and day-to-day supervision. These activities would outline a more direct tie to employee activity.

While some employers and employees fall on opposite sides of the “indirect” versus “direct” joint-employer definition disagreement it is clear that this issue is at the forefront of legislators efforts. As with most bills the path to getting passed can take many directions and take various lengths of time. Businesses, employees, and employee groups will be following H.R. 3441 closely. If it passes it would mean concrete definition and guidelines in respect to the NLRA and FLSA. However, there would still remain a list of other laws not bound by the “Save Local Business Act’s” parameters, which could be interpreted more broadly in cases of joint-employer status.