A bipartisan group of lawmakers introduced legislation Thursday to change the National Labor Relations Act and the Fair Labor Standards Act, the two of the main federal worker protection laws, to eliminate a potentially vast expansion of legal liability for companies, particularly those that franchise their brands.
The House bill would prohibit private lawsuits from using the expanded definition of “joint employer” introduced during the Obama administration.
Previous legislative efforts to address the issue had focused on the National Labor Relations Board, the federal labor law enforcement agency that introduced the expanded standard in 2014. However, lawmakers and business groups have become concerned that the board’s standard has been adopted in private-sector lawsuits. The legislation aims to nip that in the bud, giving courts a strict definition of what “joint employer” means.
“Federal labor policies should be focused on benefiting workers and helping small businesses grow instead of creating barriers that limit opportunity. Also important, Congress — not unelected federal bureaucrats — should set our nation’s labor policies through statute instead of executive fiat. Under this bipartisan legislation, workers, and the businesses they work for, will be given much needed clarity and certainty. I am especially pleased our legislation has earned support from both sides of the aisle, and I am committed to continuing to build momentum as the bill moves through the legislative process,” said Rep. Bradley Byrne, R-Ala., lead sponsor of the legislation.
Co-sponsors include Reps. Virginia Foxx, R-N.C., chairwoman of the House Education and the Workforce Committee, Tim Walberg, R-Mich., and Henry Cuellar, D-Texas.
Joint employer refers to when one business can be held legally responsible for workplace law violations at another business. Prior to 2014, the long-held standard was that a business had to have “direct control” over another business. The NLRB switched that to the much vaguer “indirect control.” It has used the expanded standard to pursue a major case against McDonald’s Corp., arguing that it is respnsible for violations at its franchises even though most are independent businesses that rent out the corporate brand.
Business groups have been sharply critical, saying the NLRB’s definition can essentially mean whatever lawyers want it to. Roger King, senior labor and employment counsel for HR Policy Association, a trade group, said the board hasn’t explained what definition is being used in the McDonald’s case. “The NLRB’s general counsel has been playing hide-the-ball on that,” he said.
The board’s standard was adopted by the Labor Department and other federal agencies during the Obama administration. Last month, Labor Secretary Alexander Acosta formally rolled that back. The NLRB’s members are nominated by the president but the board operates independently. The House Appropriations Committee this month passed a spending bill that included a provision prohibiting the board from using the policy.
Sources involved in the drafting of the legislation who requested anonymity said recent private-sector cases invoking the cases, patricularly in the 4th Circuit Court of Appeals, convinced them that merely limiting the board and other federal agencies was no longer sufficient. Both the NLRA and FLSA had to be rewritten to specify when the standard can be applied.
NLRB critics such as Foxx argue the standard will harm the economy by making businesses reluctant to franchise at all for fear of the expanded liability. “Right now, local employers across the country face an enormous amount of uncertainty because of a vague and confusing joint employer standard. Congress cannot sit on the sidelines while this harmful scheme threatens to destroy jobs and make it harder for entrepreneurs to achieve the American dream of owning a business,” Foxx said.
Business groups applauded the legislation’s introduction. “The National Restaurant Association commends Chairwoman Foxx, and Subcommittee Chairmen Byrne and Walberg for introducing legislation to restore the traditional joint employer standard. The current standard is vague and negatively impacting small businesses and employees across the country including the restaurant industry. We urge the House to bring the bipartisan Save Local Business Act to the floor for a vote as quickly as possible,” said Cicely Simpson, the trade association’s executive vice president.
