GOP Passes Legislation to Protect Businesses from Liability for Labor Law Violations
the rules held companies responsible for the actions taken by their subcontractors
H.R. 3441: The “Save Local Business Act,” passed by the House Nov. 7, aims to prevent the NLRB from holding businesses liable for labor law violations committed by franchisees or contractors.
The legislation knocks down a rule created by the National Labor Relations Board during the Obama administration in 2015. That rule held companies responsible for the actions taken by their subcontractors, labeling them as “joint employers.” This bill would “protect” small businesses from labor violations committed by any firm directly in charge of workers.
House passes joint employer bill to reverse NLRB ruling
Industry Dive, By Kathryn Moody • Nov. 8, 2017
The U.S. House of Representatives passed the Save Local Business Act in a 242-181 party-line vote on Tuesday evening. The bill clarifies the definition of "joint employer" under both the National Labor Relations Act (NLRA) and the Fair Labor Standards Act (FLSA).
The new definition outlined in the bill states that an employer must have "active, direct" control over a worker's employment to be held as jointly liable under either the NLRA or FLSA, rolling back the National Labor Relations Board's (NLRB) current ruling on the subject.
The bill faces a tougher road in the Senate, but has strong support from various employer groups, who were concerned about the NLRB's expanded reach.
Ever since the NLRB expanded the meaning of joint employment through its infamous Browning-Ferris decision, employer groups have wrestled with the issue, worried about the far-reaching impact it could have on businesses. The ruling claimed that employers who had indirect control over workers could be considered jointly liable, creating uncertainty for the future viability of franchising, contracting and other relationships.
"Ideally, such legislation should not be necessary, as the NLRB already had a workable standard prior to Browning-Ferris. The Agency’s [sic] attempt to expand its reach is what initiated this response," Patrick Scully, partner at Sherman & Howard in the Labor & Employment Department, told HR Dive.
With a new federal administration comes new priorities, including at the NLRB and Department of Labor (DOL). The DOL recently withdrew its Administrator's Interpretation (AI) on the topic and the NLRB will have a Republican majority by the end of the year, foretelling a potential shift. Change, however, will take considerable time — which is likely why this bill emerged. All eyes are now on the Senate.
Meanwhile, Browning-Ferris currently sits at a D.C. appeals court. Observers have been awaiting a decision on the ruling since spring 2017.