House Modifies Joint Employer Test in New Bill

Yesterday, Thursday, July 27th, the U.S. House of Representatives passed a bill entitled the “Save Local Businesses Act.” The bill tightens the standards for how joint employers will be analyzed under federal wage and labor laws by providing that two or more employers must have “actual, direct, and immediate” control over employees to be considered joint employers. The bill identifies essential terms and conditions of employment as an area of control that could trigger joint liability, such as hiring and firing decisions, setting rates of pay, day-to-day supervision of employees, and employee discipline.                                                             

The House’s bill would amend the National Labor Relations Act and the Fair Labor Standards Act. Under current law, a business could be deemed a joint employer if it exerts “indirect control” over a contractor, or if it reserves the ability to exert such control. Indirect control was discussed by the National Labor Relations Board in a 2015 decision involving Browning-Ferris Industries of California, a decision currently on appeal that creates a murky standard and exposes businesses to expanded liability, much to their chagrin. The Save Local Businesses Act seeks to reign in that increased potential liability.

The bill is likely to get support from the Republican majority in the Senate and likely to get support from President Trump himself. Just last month, Trump’s Labor Secretary advised the Department of Labor was withdrawing a 2016 interpretive memo issued by the Obama administration on joint employer liability. The 2016 memo offered guidance in line with the Browning-Ferris decision and essentially stated that a business could be held liable for wage and hour violations of another independent business even if there was no direct control exercised over the independent business’s workers. In today’s political climate, a bill that seeks to “save local businesses” and roll back rules regarding employer liability has a good chance of being signed into law when the time comes.

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