Republican lawmakers introduced legislation Wednesday to nullify recent moves by the National Labor Relations Board, the main federal labor law enforcement agency, to expand corporate liability.
The legislation would restrict the board’s ability to declare companies “joint employers” legally liable for labor rights violations by their subcontractors and franchisees.
“The board’s effort to redefine the idea of what it means to be an employer will wreak havoc on families and small businesses across the country. Our common-sense proposal would restore policies in place long before the NLRB’s radical decision, the very same policies that served workers, employers and consumers well for decades,” said Sen. Lamar Alexander of Tennessee, chairman of the Health, Education, Labor and Pensions Committee, and Rep. John Kline of Minnesota, chairman of the Education and the Workforce Committee, in a joint statement.
The board’s “joint employer” doctrine holds that a company can be liable for labor violations by another business if the former has effective control over the latter’s employees. For decades, the rule was interpreted narrowly by the board, excluding businesses that were legally separate.
Under President Obama, the board has acted to expand the definition. In a case last month called Browning Ferris Industries, the board ruled that contractors could be held liable for violations by subcontractors. The board also has a complaint pending against McDonald’s Corp., arguing that it is a joint employer with its franchisees, even thought an estimated 90 percent of the fast-food restaurants are privately owned businesses.
Business groups have reacted with alarm, saying the change would undermine the franchise business model, hurting both corporations and small businesses. Companies would be forced to either assert more control over franchises’ business practices to counter their increased liability or sever ties with them, forcing them to survive without the help of the company brand.
Republicans echoed business’s concern. “If you take away incentives for corporations to franchise, the results will be similar to what we have already seen in so many oversteps by the Obama administration and the NLRB: making the big guys bigger and putting the small guys out of business. Instead, this administration should be focusing on how to create more opportunities for small businesses to grow,” said Sen. Johnny Isakson, R-Ga.
The bill, titled the “Protecting Local Business Opportunity Act,” would codify that an employer must have “actual, direct and immediate” control over an employee to be considered a joint employer, returning to the standard the board has used since the 1980s.
A spokeswoman for the labor board said the agency does comment on congressional legislation.
The legislation has 36 Senate co-sponsors, all Republicans. The number of co-sponsors for the House version was not available. Trade groups have been lobbying Democrats over the summer trying to get them to join the effort.
