[House Report 114-355]
[From the U.S. Government Publishing Office]


 114th Congress     }                                 {       Report
                    }  HOUSE OF REPRESENTATIVES       {   
 1st Session                                                   114-355
======================================================================



 
               PROTECTING LOCAL BUSINESS OPPORTUNITY ACT

                                _______
                                

December 1, 2015.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Kline, from the Committee on Education and the Workforce, submitted 
                             the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 3459]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Education and the Workforce, to whom was 
referred the bill (H.R. 3459) to clarify the treatment of two 
or more employers as joint employers under the National Labor 
Relations Act, having considered the same, report favorably 
thereon with an amendment and recommend that the bill as 
amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Protecting Local Business Opportunity 
Act''.

SEC. 2. TREATMENT OF JOINT EMPLOYERS.

  Section 2(2) of the National Labor Relations Act (29 U.S.C. 152(2)) 
is amended by adding at the end the following: ``Notwithstanding any 
other provision of this Act, two or more employers may be considered 
joint employers for purposes of this Act only if each employer shares 
and exercises control over essential terms and conditions of employment 
and such control over these matters is actual, direct, and 
immediate.''.

          H.R. 3459, PROTECTING LOCAL BUSINESS OPPORTUNITY ACT


                            COMMITTEE REPORT


                                Purpose

    H.R. 3459, the Protecting Local Business Opportunity Act, 
protects small businesses such as franchisees and 
subcontractors from an assault on their independence. The bill 
restores the long-held standard for determining ``joint 
employer'' status under the National Labor Relations Act (NLRA 
or the Act) that was recently overturned by a decision of the 
National Labor Relations Board (NLRB or the Board). 
Specifically, the bill codifies the standard used by the Board 
prior to August 27, 2015, by amending the NLRA to provide that 
two or more employers are joint employers only if each shares 
and exercises actual, direct, and immediate control over the 
essential terms and conditions of employment.

                            Committee Action


                             113TH CONGRESS

Subcommittee holds NLRB oversight hearing

    On June 24, 2014, the Subcommittee on Health, Employment, 
Labor, and Pensions (HELP) held an NLRB oversight hearing 
titled ``What Should Workers and Employers Expect Next from the 
National Labor Relations Board?'' Witnesses before the 
subcommittee were Mr. Andrew F. Puzder, CEO, CKE Restaurants 
Holdings, Inc., Carpinteria, California; Mr. Seth H. Borden, 
Partner, McKenna Long & Aldridge, New York, New York; Mr. James 
B. Coppess, Associate General Counsel, AFL-CIO, Washington, DC; 
and Mr. G. Roger King, Of Counsel, Jones Day, Columbus, Ohio. 
Witnesses discussed upcoming NLRB cases as well as Board policy 
and cited changes to the joint employer standard as one of the 
most significant and controversial issues before the Board at 
that time.

Subcommittee examines potential changes to the NLRB's joint employer 
        standard

    On September 9, 2014, the HELP Subcommittee held a hearing 
on potential changes to the NLRB's joint employer standard 
titled ``Expanding Joint Employer Status: What Does it Mean for 
Workers and Job Creators?'' Witnesses at the hearing were Mr. 
Todd Duffield, Shareholder, Ogletree, Deakins, Nash, Smoak & 
Stewart, Atlanta, Georgia; Mr. Clint Ehlers, President, 
FASTSIGNS of Lancaster and Willow Grove, Lancaster and Willow 
Grove, Pennsylvania, testifying on behalf of the International 
Franchise Association; Mr. Harris Freeman, Professor, Western 
New England University School of Law, Springfield, 
Massachusetts; Ms. Catherine Monson, Chief Executive Officer, 
FASTSIGNS International, Inc., Carrollton, Texas, testifying on 
behalf of the International Franchise Association; and Mrs. 
Jagruti Panwala, owner of multiple hotel franchises in the 
northeastern United States, Bensalem, Pennsylvania. Witnesses 
spoke about how an expanded joint employer standard would 
negatively impact franchises and other small businesses.

                             114TH CONGRESS

Subcommittee field hearing in Mobile, Alabama

    On August 25, 2015, the HELP Subcommittee held a field 
hearing titled ``Redefining `Employer' and the Impact on 
Alabama's Workers and Small Business Owners'' in Mobile, 
Alabama. Witnesses at this hearing were Mr. Marcel Debruge, 
Burr & Forman LLP, Birmingham, Alabama; Mr. Chris Holmes, CEO, 
CLH Development Holdings, Inc., Tallahassee, Florida; and 
Colonel Steve Carey, Owner and Operator, CertaPro Painters of 
Mobile & Baldwin Counties, Daphne, Alabama, testifying on 
behalf of the Coalition to Save Local Businesses and the 
International Franchise Association. Witnesses testified an 
expanded joint employer standard would threaten the 
independence of small businesses in Alabama and deter 
franchisors from licensing new franchisees.

Subcommittee field hearing in Savannah, Georgia

    On August 27, 2015, the HELP Subcommittee held a field 
hearing titled ``Redefining `Employer' and the Impact on 
Georgia's Workers and Small Business Owners'' in Savannah, 
Georgia, regarding the NLRB's joint employer standard. 
Witnesses at this hearing were Mr. Jeffrey Mintz, Shareholder, 
Littler Mendelson P.C., Atlanta, Georgia; Mr. Kalpesh ``Kal'' 
Patel, President and COO, Image Hotels, Inc., Pooler, Georgia; 
Mr. Alex Salgueiro, Savannah Restaurants Corp., Savannah, 
Georgia; and Mr. Fred Weir, President, Meadowbrook Restaurant 
Company Inc., Cumming, Georgia, testifying on behalf of the 
Coalition to Save Local Businesses and the International 
Franchise Association. Witnesses testified an expanded joint 
employer standard would hurt small business growth in Georgia 
and create significant barriers to entry for potential 
franchise owners.

H.R. 3459, Protecting Local Business Opportunity Act, introduced

    On September 9, 2015, Representative John Kline (R-MN), 
Chairman of the Committee on Education and the Workforce, 
introduced the Protecting Local Business Opportunity Act (H.R. 
3459). Recognizing the threat to small businesses posed by the 
NLRB's decision in Browning-Ferris Industries of California, 
Inc. (BFI),\1\ the legislation amends the NLRA to restore the 
long-held standard that two or more employers can only be 
considered joint employers for purposes of the Act if each 
shares and exercises control over essential terms and 
conditions of employment and such control over these matters is 
actual, direct, and immediate.
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    \1\362 NLRB No. 186 (2015).
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    Senator Lamar Alexander (R-TN), Chairman of the Senate 
Committee on Health, Education, Labor, and Pensions, introduced 
companion legislation, S. 2015, on the same day.

Legislative hearing on H.R. 3459, Protecting Local Business Opportunity 
        Act

    On September 29, 2015, the HELP Subcommittee held a 
legislative hearing on H.R. 3459, the Protecting Local Business 
Opportunity Act. Witnesses at the hearing were Mr. Ed Braddy, 
President, Winlee Foods, LLC, Timonium, Maryland, testifying on 
behalf of himself and the National Franchisee Association; Mr. 
Kevin Cole, CEO, Ennis Electric Company, Inc., Manassas, 
Virginia, testifying on behalf of the Independent Electrical 
Contractors; Mr. Charles Cohen, former Member of the NLRB and 
Senior Counsel, Morgan, Lewis & Bockius, LLP, Washington, D.C.; 
Ms. Mara Fortin, President and CEO, Nothing Bundt Cakes, San 
Diego, California, testifying on behalf of herself and the 
Coalition to Save Local Businesses; Mr. Michael Harper, 
Professor, Boston University School of Law, Boston, 
Massachusetts; and Dr. Anne Lofaso, Professor, West Virginia 
University College of Law, Morgantown, West Virginia. Witnesses 
testified H.R. 3459 would restore the joint employer standard 
that had worked well for workers and business owners for 
decades and would protect opportunities for small business 
growth.

Committee passes H.R. 3459, Protecting Local Business Opportunity Act

    On October 28, 2015, the Committee on Education and the 
Workforce considered H.R. 3459, the Protecting Local Business 
Opportunity Act. Representative Buddy Carter (R-GA) offered an 
amendment in the nature of a substitute, making a technical 
change to clarify a reference to ``employers'' in the Act. The 
Committee voted to adopt the amendment in the nature of a 
substitute by voice vote. Five additional amendments were 
offered and ruled out of order, as they were non-germane to the 
underlying legislation. The Committee favorably reported H.R. 
3459, as amended, to the House of Representatives by a vote of 
21-15.

                                Summary

    The Protecting Local Business Opportunity Act, will codify 
the NLRB's previous ``joint employer'' standard used for 
decades prior to the Board's decision in BFI on August 27, 
2015. The bill amends the NLRA to provide that two or more 
employees may be considered joint employers under the NLRA only 
if each shares and exercises actual, direct, and immediate 
control over essential terms and conditions of employment.

                            Committee Views


                               BACKGROUND

    In 1935, Congress passed the NLRA, guaranteeing the right 
of most private sector employees to organize and select their 
own representatives.\2\ The NLRA established the NLRB, an 
independent federal agency, to fulfill two principle functions: 
(1) to prevent and remedy employer and union unlawful acts, 
called ``unfair labor practices'' (ULPs), and (2) to determine 
by secret ballot election whether employees wish to be 
represented by a union. In determining whether employees wish 
to be represented by a union, the NLRA is wholly neutral.\3\
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    \2\The NLRA does not cover all employees and employers in the 
United States. For example, public sector employers (state, local, and 
federal employees), employers covered by the Railway Labor Act 
(airlines and railroads), agricultural laborers, and supervisors are 
not covered by the Act. 29 U.S.C. Sec. 152(2)-(3).
    \3\NLRB v. Savair Mfg., 414 U.S. 270, 278 (1973).
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    In 1947, Congress passed the most significant amendment to 
the NLRA, the Taft-Hartley Act,\4\ abandoning ``the policy of 
affirmatively encouraging the spread of collective bargaining . 
. . [and] striking a new balance between protection of the 
right to self-organization and various opposing claims.''\5\ 
The Taft-Hartley Act clarified that employees have the right to 
refrain from participating in union activity,\6\ prohibited 
unions from certain practices to coerce employees or 
employers,\7\ codified employer free speech,\8\ and made 
changes to the determination of bargaining units.\9\
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    \4\29 U.S.C. Sec. 141 et seq.
    \5\Archibald Cox, Some Aspects of the Labor Management Relations 
Act of 1947, 61 Harv. L. Rev. 1, 4 (1947).
    \6\29 U.S.C. Sec. 157.
    \7\Id. Sec. 158(b).
    \8\Id. Sec. 158(c).
    \9\Id. Sec. 159(d).
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Previous joint employer standard

    Prior to BFI, the NLRB used a long-held and well-
established standard to determine whether two separate entities 
should be considered joint employers. This standard analyzed 
whether alleged joint employers shared control over or co-
determined the essential terms and conditions of employment, 
including hiring, firing, discipline, supervision, and 
direction of employees.\10\ Notably, the Board required this 
control to be actual, direct, and immediate for finding joint 
employer status.\11\
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    \10\TLI, Inc., 271 NLRB 798. 798-99 (1984), overruled by BFI, 362 
NLRB No. 186 (Aug. 27, 2015).
    \11\Airborne Express, 338 NLRB 597, 597 n.1 (2002) (``essential 
element in [joint employer] analysis is whether a putative joint 
employer's control over employment matters is direct and immediate.), 
overruled by BFI, 362 NLRB No. 186 (Aug. 27, 2015); AM Prop. Holding 
Corp., 350 NLRB 998, 1000 (2007) (``In assessing whether a joint 
employer relationship exists, the Board . . . looks to the actual 
practice of the parties.''), overruled by BFI, 362 NLRB No. 186 (Aug. 
27, 2015).
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    At the legislative hearing on H.R. 3459, former Board 
Member Charles Cohen described the previous standard as 
follows:

          The Board's prior standard struck an appropriate 
        balance between a company's right to manage its 
        relationships with its contractors and suppliers, and 
        the right of employees to organize a union and to have 
        an employer at the bargaining table that is able to 
        engage in meaningful collective bargaining. That 
        standard ensured that a company was at the bargaining 
        table if it exercised actual control over the terms and 
        conditions of employment of its contractor's employees, 
        as opposed to potential or indirect control through the 
        terms of the business agreement between the company and 
        its contractor.\12\
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    \12\Protecting Local Business Opportunity Act: Hearing on H.R. 3459 
Before the House Subcomm. on Health, Employment, Labor, and Pensions, 
Comm. on Educ. and the Workforce, 114th Cong. (Sept. 29, 2015) (written 
testimony of Charles I. Cohen at 3) [hereinafter Cohen Written 
Testimony].
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                              BFI DECISION

    In BFI, a Teamsters local sought to organize recycling 
sorters directly employed by Leadpoint Business Services 
(Leadpoint), a subcontractor of BFI. The Teamsters asserted BFI 
was a joint employer with Leadpoint. The NLRB regional director 
applied the established joint employer standard and found BFI 
did not exert sufficient control over Leadpoint's employees to 
be a joint employer. The regional director directed an election 
with Leadpoint as the sole employer, and the Teamsters 
appealed.
    On appeal, the Board adopted a new, broader standard and 
found that BFI was a joint employer with Leadpoint. The Board 
held that two or more entities are joint employers if (1) there 
is a common-law employment relationship with the employees in 
question and (2) the putative joint employer possesses 
sufficient control over employees' essential terms and 
conditions of employment to permit meaningful collective 
bargaining.\13\ The Board rejected the previous requirement 
that the joint employer's control be actual, direct, and 
immediate, specifically overruling three decades of Board 
precedent.\14\ Instead, the ``right to control,'' even if it is 
not actually exercised, is now evidence of joint employer 
status.\15\ At the legislative hearing on H.R. 3459, former 
Board Member Cohen noted that under the new standard, ``a joint 
employer relationship may be found based on the mere potential 
to control terms and conditions of employment, even if that 
control is indirect and/or unexercised.''\16\
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    \13\BFI, 362 NLRB No. 186, slip op. at 2 (2015).
    \14\Id. at 16.
    \15\Id.
    \16\Cohen WrittenTestimony at 1-2 (emphasis in the original).
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BFI dissenting opinion

    In response to the three-member majority's decision, NLRB 
Members Phillip A. Miscimarra and Harry I. Johnson, III, wrote 
a scathing dissent. They noted that not only was the majority 
decision a radical departure from the current standard, but 
also that it has the potential to reach all manner of 
industries and greatly disrupt labor-management relations.
    Board Members Miscimarra and Johnson warned:

          In sum, today's majority holding does not represent a 
        ``return to the traditional test used by the Board,'' 
        as our colleagues claim even while admitting that the 
        Board has never before described or articulated the 
        test they announce today. Contrary to their 
        characterization, the new joint-employer test 
        fundamentally alters the law applicable to user-
        supplier, lessor-lessee, parent-subsidiary, contractor-
        subcontractor, franchisor-franchisee, predecessor or 
        successor, creditor-debtor, and contractor-consumer 
        business relationships under the Act. In addition, 
        because the commerce data applicable to joint employers 
        is combined for jurisdictional purposes, the Act's 
        coverage will extend to small businesses whose separate 
        operations and employees have until now not been 
        subject to Board jurisdiction. [W]e believe the 
        majority impermissibly exceeds our statutory authority, 
        misreads and departs from prior case law, and subverts 
        traditional common-law agency principles. The result is 
        a new test that confuses the definition of a joint 
        employer and will predictably produce broad-based 
        instability in bargaining relationships. It will do 
        violence as well to other requirements imposed by the 
        Act, notably including the secondary boycott protection 
        that Congress afforded to neutral employers.\17\
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    \17\BFI, 362 NLRB No. 186, slip op. at 23-24 (Miscimarra and 
Johnson, Members, dissenting).

    The dissenters went on to address the substantial impact 
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the decision could have on contract negotiations:

          Collective bargaining was intended by Congress to be 
        a process that could conceivably produce agreements. 
        One of the key analytical problems in widening the net 
        of ``who must bargain'' is that, at some point, 
        agreements predictably will not be achievable because 
        different parties involuntarily thrown together as the 
        ``bargainers'' under the majority's new test will 
        predictably have widely divergent interests. Today's 
        marked expansion of bargaining obligations to other 
        business entities threatens to destabilize existing 
        bargaining relationships and complicate new ones. Even 
        if one takes an extremely simplistic user-supplier 
        scenario, the new standard's conferral of joint-
        employer status--making many clients an ``employer'' of 
        contractor employees, while making contractors an 
        ``employer'' jointly with the clients--will produce 
        bargaining relationships and problems unlike any that 
        have existed in the Board's entire 80-year history 
        which clearly were never contemplated or intended by 
        Congress.\18\
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    \18\Id. at 38.
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            CONSEQUENCES OF THE NEW JOINT EMPLOYER STANDARD

    The BFI decision will have far-reaching consequences on 
labor-management relations and the U.S. economy. While the 
framers of the NLRA never envisioned such a broad standard, BFI 
will benefit unions at the expense of small businesses on the 
picket line, at the bargaining table, and before the Board. The 
disastrous results--fewer jobs, greater corporate control over 
local businesses, and the disruption of commercial activity--
will be reflected throughout the economy.

Expanded union power

    Unions have long sought a broader test to protect 
``concerted activity''\19\ and to bring more parties to the 
bargaining table. Prior to BFI, there were reasonable limits on 
union activity against neutral employers, such as secondary 
boycotts.\20\ However, if a previously neutral employer (i.e., 
a franchisor or contracting company) is deemed a joint 
employer, a previously illegal secondary boycott would then be 
NLRA-protected concerted activity. This would allow a union to 
pressure one of the employers into a neutrality agreement or 
voluntary recognition.\21\
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    \19\See 29 U.S.C. Sec. 157 (``Employees shall have the right to 
self-organization, to form, join, or assist labor organizations, to 
bargain collectively through representatives of their own choosing, and 
to engage in other concerted activities for the purpose of collective 
bargaining or other mutual aid or protection . . .''.).
    \20\See Id. Sec. 158(b)(4). In a secondary boycott, a union and its 
members refuse to work for, purchase from, or handle the products of a 
business with which the union has a dispute.
    \21\A ``neutrality agreement'' is a contract between a union and an 
employer under which the employer agrees to support a union's attempt 
to organize its workforce. ``Voluntary recognition'' is when employees 
persuade an employer to voluntarily recognize a union after showing 
majority support by signed authorization cards or other means.
---------------------------------------------------------------------------
    Former Board Member Charles Cohen, testifying before the 
HELP Subcommittee, explained how BFI undermines the NLRA's 
policy on secondary boycotts:

          In 1947, Congress explicitly amended the NLRA to 
        prohibit ``secondary'' boycotts and picketing directed 
        at neutral employers. Congress intended for secondary 
        or neutral employers not to be drawn into labor 
        disputes between an employer and its own employees. 
        Now, in a single decision wholly unrelated to those 
        secondary boycott provisions, the Board has undercut 
        those very provisions by expanding the universe of 
        ``employers'' that automatically lose neutral status 
        based on their commercial relationship with a third 
        party. . . . [O]nce deemed an ``employer,'' a formerly 
        neutral company can be subject to union pressures at 
        all of that company's operations throughout the United 
        States and not just the single site or area where the 
        joint employer liability originated.\22\
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    \22\Cohen Written Testimony at 5 (citation omitted) (emphasis in 
original).

    Labor attorney Jeffrey Mintz, testifying before the HELP 
Subcommittee in Savannah, Georgia, also noted how expanding the 
joint employer standard will permit what were previously 
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considered to be prohibited secondary boycotts:

          A business not previously exposed to labor disputes 
        involving the employees of a business with which they 
        engaged could become embroiled under the proposed 
        standard. The NLRA generally permits unions to use 
        economic weapons such as strikes, pickets and boycotts 
        at an employer's facilities if it has a labor dispute 
        with the employer. However, the NLRA prohibits unions 
        from using such economic weapons against ``neutral'' 
        third parties. Where, however, a joint employer 
        relationship exists between the employer directly 
        involved in the labor dispute and a secondary employer, 
        the joint employer is considered an ``ally'' of the 
        primary employer, and consequently, loses the NLRA 
        protection against union pressure. See, e.g., Teamsters 
        Local 557, 338 NLRB 896 (2003) (noting that third party 
        loses its neutrality where it exercises substantial 
        control over picketers' terms of employment).\23\
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    \23\Redefining ``Employer'' and the Impact on Georgia's Workers and 
Small Business Owners: Field Hearing in Savannah, Georgia, Before the 
House Subcomm. on Health, Employment, Labor, and Pensions, Comm. on 
Educ. and the Workforce, 114th Cong. (Aug. 27, 2015) (written testimony 
of Jeffrey Mintz at 9) [hereinafter Mintz Written Testimony].

    As discussed in the BFI dissent, with more parties at the 
table, unions can force employers with opposing interests to 
compete against one another. For example, a contractor might 
want greater control over work hours while the contracting 
employer's primary concern is production. In such a situation, 
collective bargaining will now pit employers against each other 
to the union's advantage. Mr. Cohen indicated such negotiations 
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are unworkable:

          Now that two or more employers may be swept into 
        union negotiations, either on all mandatory subjects of 
        bargaining or perhaps only some, the Board has provided 
        no guidance for how such bargaining is to work in 
        practice. For instance, if the two or more putative 
        employers have conflicting financial or commercial 
        interests--as they often do--how are they to bargain a 
        single collective bargaining agreement with a 
        union?\24\
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    \24\Cohen Written Testimony at 4.

New barriers for contractors

    The economic benefits of contract work will be greatly 
diminished by the new joint employer standard. For instance, 
many manufacturing plants contract out janitorial work so that 
they can efficiently focus on manufacturing. Under the new 
joint employer standard, however, the manufacturing company may 
be liable for the janitorial company's employment actions and 
would be forced to bargain with the janitorial company's 
employees. This would greatly reduce the benefits of 
contracting out work and make the manufacturing company less 
efficient as a result, which in turns threatens economic growth 
and job creation.\25\
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    \25\See, e.g., Letter from Joe Trauger, Vice President, Human 
Resources Policy, National Association of Manufacturers, to the 
Honorable John Kline, Chairman, House Education and the Workforce 
Committee (Oct. 26, 2015).
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    Additionally, the threat of joint liability will stop many 
contractors from working with new or small subcontractors. 
Kevin Cole, CEO of the Ennis Electric Company, speaking on 
behalf of the Independent Electrical Contractors, testified to 
this at the legislative hearing:

          This new standard . . . prevents us from working with 
        certain start-ups or new small businesses that may have 
        a limited track record. For example, my company will 
        take on certain small businesses as subcontractors, 
        which will often times be owned by minorities or women, 
        and help mentor them on certain projects. With this new 
        standard, I'm now less likely to take on that risk. I 
        am also less likely to bid on federal contracts over 
        $1.5 million, under which the Federal Acquisition 
        Regulation (FAR) system mandates I subcontract with 
        small businesses.\26\
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    \26\Protecting Local Business Opportunity Act: Hearing on H.R. 3459 
Before the House Subcomm. on Health, Employment, Labor, and Pensions, 
Comm. on Educ. and the Workforce, 114th Cong. (Sept. 29, 2015) (written 
testimony of Kevin Cole at 3).

Destruction of the modern franchise model

    BFI will also irreparably disrupt the franchise model. 
Applying the new standard, franchisors may be joint employers 
with their franchisees based on indirect control of the 
franchisees' operations. Thus, the NLRB's expanded definition 
of joint employer will eliminate the primary benefit of the 
franchise system, which gives franchise small business owners 
complete discretion over their workforce while also enjoying 
the advantages of associating with a franchisor's brand name. 
With franchisors and franchisees now deemed joint employers, 
the franchisor's potential liabilities will go up, requiring 
increased involvement in franchisee stores. In addition, a 
franchisor deemed to be a joint employer will also now have to 
participate in collective bargaining with any of its 
franchisees that become unionized. These added liabilities and 
responsibilities will reduce franchisees' independence and 
increase costs for the franchisor, costs that will transferred 
to small business owners and consumers.
    Furthermore, because of these increased liabilities, 
franchisors will be more restrictive with their franchise 
sales. They will likely require greater experience and 
resources from new franchisees, thereby reducing new small 
businesses opportunities under the franchise model. This will 
mean fewer opportunities for entrepreneurs, fewer businesses 
serving local communities, and less job growth in those 
communities. Testifying prior to the BFI decision at the HELP 
Subcommittee hearing on June 24, 2014, Andrew F. Puzder, CEO of 
CKE Restaurants Holdings, Inc., summarized the significant lost 
opportunities that will result from expanding the joint 
employer standard:

          The NLRB's current standard has been in place for 
        over 30 years. During that time the franchise business 
        model has proven enormously successful at enabling 
        individuals to own and operate their own businesses, 
        creating substantial economic growth and jobs. The 
        franchise model has provided countless entrepreneurial 
        opportunities for women, minorities, and veterans. If 
        the NLRB were to change that standard so as to hold 
        franchisors responsible as joint employers with their 
        franchisees, it would significantly and negatively 
        impact both the franchise business model and the small 
        businessmen and businesswomen who have invested the 
        time, energy and money in the hopes of becoming 
        successful franchisees . . . .\27\
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    \27\What Should Workers and Employers Expect Next From the National 
Labor Relations Board?: Hearing Before the House Subcomm. on Health, 
Employment, Labor, and Pensions, Comm. on Educ. and the Workforce, 
113th Cong. (June 24, 2014) (written testimony of Andrew F. Puzder at 
1).

    During hearings, the HELP Subcommittee heard from legal 
experts and franchise small business owners how BFI would cause 
harm to the franchise system. At the legislative hearing, Ed 
Braddy, a Burger King franchisee who owns and operates a 
restaurant in Baltimore, Maryland, warned ``the new joint 
employer standard will destroy smaller restaurant operators 
like me.'' According to Mr. Braddy, the new standard will 
result in franchisors repurchasing franchises, consolidating 
operations by selecting larger operators, or taking away the 
independence of franchisees by implementing detailed franchisee 
and employee policies, making him ``no more than a glorified 
manager in [his] own restaurant.''\28\ Mr. Braddy concluded:
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    \28\Protecting Local Business Opportunity Act: Hearing on H.R. 3459 
Before the House Subcomm. on Health, Employment, Labor, and Pensions, 
Comm. on Educ. and the Workforce, 114th Cong. (Sept. 29, 2015) (written 
testimony of Ed Braddy at 3).

          I am concerned that those who created this new 
        standard believe it will help the ``little guy'' and 
        put more mandates on large corporations. As a one-store 
        operator in an inner-city neighborhood, I can tell you 
        that nothing is further from the truth. The new joint 
        employer standard will hurt me, my employees and the 
        neighborhood I support. Please restore the definition 
        to require actual, direct, immediate control over the 
        essential terms of employment.\29\
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    \29\Id. at 4.

    Mara Fortin, owner of several Nothing Bundt Cakes 
franchises and speaking on behalf of the Coalition to Save 
Local Businesses, testified at the legislative hearing that due 
to the BFI decision, she could lose control of her own 
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business. Ms. Fortin cautioned:

          My franchisor had nothing to do with hiring my 
        employees or setting their wages and benefits. My 
        franchisor has nothing to do with the day-to-day 
        operations of my small business. But if they are to be 
        considered a joint employer, my franchisor may decide 
        to exert more control over my business, relegating me 
        to a middle manager role for which I did not sign 
        up.\30\
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    \30\Id. (written testimony of Mara Fortin at 6).

    At the HELP Subcommittee hearing on September 9, 2014, 
Jagruti Panwala, an independent owner and operator of five 
hotels in the northeastern United States, also testified about 
her concerns that expanding the joint employer standard could 
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cause her to lose control of her business. Mrs. Panwala stated:

          At its very core, any decision imputing liability for 
        franchisees' employment decisions onto the franchisor, 
        may cause franchisors to impose control over the daily 
        operations of each business in an effort to mitigate 
        against any claims. Essentially, I would no longer be 
        in business for myself. Moreover, with a more hands-on 
        approach to the franchise relationship, franchisors may 
        require an added presence at my properties. They may 
        insist on reviewing employment matters in advance and 
        try to direct the decision making process. If this were 
        to happen, I would essentially become an employee of 
        the parent corporation and no longer an entrepreneur. I 
        would lose the equity I have built in my business 
        overnight based on the decision of an unelected 
        bureaucrat in Washington.\31\
---------------------------------------------------------------------------
    \31\Expanding Joint Employer Status: What Does it Mean for Workers 
and Job Creators?: Hearing Before the House Subcomm. on Health, 
Employment, Labor, and Pensions, Comm. on Educ. and the Workforce, 
113th Cong. (Sept. 9, 2014) (written testimony of Jagruti Panwala at 3-
4) (emphasis in original).

    Clint Ehlers, a FASTSIGNS franchisee also testifying at the 
September 9, 2014, hearing, expressed concerns about the threat 
of expanding the joint employer standard to the independence of 
---------------------------------------------------------------------------
his small business:

          I bought a franchise so that I could run my own 
        business, not so that I could be a part of someone 
        else's. I take pride in my success, and hold myself 
        accountable for my failures. . . . The real impact of a 
        new standard that considers my franchisor the joint 
        employer of my workers is that I will have less 
        independence and less control over the business that I 
        worked so hard to build.\32\
---------------------------------------------------------------------------
    \32\Id. (written testimony of Clint Ehlers at 5).

    Retired Air Force Colonel and current CertaPro Paint 
franchisee Steve Carey explained at the Mobile, Alabama, field 
hearing how the new joint employer standard would reduce 
---------------------------------------------------------------------------
opportunities for prospective small business owners:

          If CertaPro is going to be responsible for the 
        liabilities arising out of the operation of the 
        business, and oversight of the workforce, why would 
        they hand control over to me? Many businesses may feel 
        this way and opportunities for local business ownership 
        will decline dramatically. I know how fortunate I am to 
        own my business after my long service in the military. 
        While CertaPro provides advice and support, I am the 
        decision-maker when it comes to my business. The 
        success or failure of my business is, essentially, all 
        on me--and that's exactly what I signed up for. It 
        would be a real shame to take these opportunities away 
        from other veterans looking to start their ``second 
        life'' as a local franchise business owner as well.\33\
---------------------------------------------------------------------------
    \33\Redefining ``Employer'' and the Impact on Alabama's Workers and 
Small Business Owners: Field Hearing in Mobile, Alabama, Before the 
House Subcomm. on Health, Employment, Labor, and Pensions, Comm. on 
Educ. and the Workforce, 114th Cong. (Aug. 25, 2015) (written testimony 
of Steve Carey at 4).

    Also testifying in Mobile, Alabama, Firehouse Subs 
---------------------------------------------------------------------------
franchisee Chris Holmes expressed similar concerns:

          While it is quite clear that the NLRB wants to 
        negatively impact the business model of some of 
        America's largest companies through this action, it is 
        ironic that what they will actually be doing is hurting 
        America's smallest businesses. The real effect will be 
        small franchisee operators essentially losing their 
        business to an often larger franchisor--making the 
        large company larger and the franchisee extinct. If 
        your goal was to push small business operators to the 
        curb and stifle investment into new start-up 
        businesses, you couldn't come up with a more effective 
        tool than this joint employer decision.\34\
---------------------------------------------------------------------------
    \34\Id. (written testimony of Chris Holmes at 3).

    At the Savannah, Georgia, field hearing, Kal Patel, a hotel 
franchisee and past board member of the Asian American Hotel 
Owners Association (AAHOA), testified about the threat of a new 
---------------------------------------------------------------------------
joint employer standard to the franchise model:

          As an hotelier, I have come to depend on the 
        franchise model as the most advantageous means to small 
        business ownership. Consequently, I am deeply concerned 
        that the NLRB's efforts to expand the definition of 
        joint employer status will transfer control of small 
        businesses from independent hotel owners and operators 
        to large corporations. An expanded joint employer legal 
        standard intimated by the NLRB would compel franchisors 
        to take an active role in staffing decisions due to the 
        newly manufactured potential for liability. 
        Franchisees, including the majority of AAHOA members, 
        would lose independence in decision making and would 
        effectively become employees of the franchisor because 
        they would be forced to follow someone else's 
        directives.\35\
---------------------------------------------------------------------------
    \35\Redefining ``Employer'' and the Impact on Georgia's Workers and 
Small Business Owners: Field Hearing in Savannah, Georgia, Before the 
House Subcomm. on Health, Employment, Labor and Pensions, Comm. on 
Educ. and the Workforce, 114th Cong. (Aug. 27, 2015) (written testimony 
of Kal Patel at 3).

    Alex Salgueiro, a Burger King franchisee, agreed. He 
concluded, ``The new joint employer standard as proposed by the 
NLRB will quickly destroy a successful business model which has 
been in place for decades.''\36\
---------------------------------------------------------------------------
    \36\Id. (written testimony of Alex Salgueiro at 3).
---------------------------------------------------------------------------
    Fred Weir, a Zaxby's franchisee, also spoke about the 
negative consequences of the new joint employer standard. He 
stated:

          Mr. Chairman, the new joint employer proposal from 
        the NLRB would drain the life from the hundreds of 
        thousands of small businesses that operate just like 
        mine. The new standard would force operational changes 
        on the franchisor, and on franchisees. Since the NLRB 
        appears determined to change the measure of who 
        controls the business, the balance of control between 
        franchisor and franchisee will have to change. The 
        franchisor's magnified liability will mean 
        substantially diminished control for the 
        franchisee.\37\
---------------------------------------------------------------------------
    \37\Id. (written testimony of Fred Weir at 3).

    In addition to the concerns expressed by franchisees, labor 
attorney Marcel Debruge argued at the Mobile, Alabama, field 
hearing that the new standard was ill-conceived from the 
perspective of management and franchisors. He cautioned, 
``[E]mployers are all-but-guaranteed to incur greater legal 
costs because they would share liability for a temporary 
employee or franchisee's actions.''\38\
---------------------------------------------------------------------------
    \38\Redefining ``Employer'' and the Impact on Alabama's Workers and 
Small Business Owners: Field Hearing in Mobile, Alabama, Before the 
House Subcomm. on Health, Employment, Labor, and Pensions, Comm. on 
Educ. and the Workforce, 114th Cong. (Aug. 25, 2015) (written testimony 
of Marcel Debruge at 5) [hereinafter Debruge Written Testimony].
---------------------------------------------------------------------------
    Likewise, at the Savannah, Georgia, field hearing, labor 
attorney Jeffrey Mintz reasoned:

          Disturbing the well-established standard applied to 
        determine whether a joint employer relationship exists 
        and, more particularly, opting for a broader, ambiguous 
        standard, would require many employers to revisit, 
        analyze and likely revise their current business 
        practices which could negatively impact many other 
        businesses and their employees.\39\
---------------------------------------------------------------------------
    \39\Mintz Written Testimony at 2.

    The result of such revisions would likely be increased 
franchisor control and fewer locally owned franchises. As 
Catherine Monson, CEO of FASTSIGNS International, explained in 
---------------------------------------------------------------------------
her testimony at the September 9, 2014, hearing:

          Faced with potential liability for their franchisees' 
        employment decisions, franchisors may be forced to 
        exercise operational control over all the employment 
        and human resources decisions of franchisees, 
        undermining the franchise business model. . . . This 
        increased franchisor control would significantly 
        disrupt the franchise relationship. Franchisors . . . 
        would have less incentive to participate in the 
        business model going-forward if they were responsible 
        for areas of operation historically reserved to and 
        exercised by their franchisees.\40\
---------------------------------------------------------------------------
    \40\Expanding Joint Employer Status: What Does it Mean for Workers 
and Job Creators?: Hearing Before the House Subcomm. on Health, 
Employment, Labor, and Pensions, Comm. on Educ. and the Workforce, 
113th Cong. (Sept. 9, 2014) (written testimony of Catherine Monson at 
4).

    Former NLRB Member Cohen noted at the legislative hearing 
franchisors may respond in an alternative way. He argued the 
new standard would likely discourage franchisors from 
``promoting special hiring programs'' for underrepresented 
groups, such as veterans, out of fear that these programs would 
be used as evidence of joint employer status with their 
franchisees.\41\
---------------------------------------------------------------------------
    \41\Cohen Written Testimony at 5.
---------------------------------------------------------------------------

Other business relationships disrupted by BFI

    Franchises and contractors will not be the only ones hurt 
by the BFI decision. As Mr. Cohen testified, ``This new 
ambiguous standard has the potential to apply to a wide variety 
of business relationships.''\42\ In their BFI dissent, Board 
Members Miscimarra and Johnson discussed the numerous 
industries and businesses that may be jeopardized:
---------------------------------------------------------------------------
    \42\Id. at 2.

    The number of contractual relationships now potentially 
encompassed within the majority's new standard appears to be 
virtually unlimited:
           Insurance companies that require employers 
        to take certain actions with employees in order to 
        comply with policy requirements for safety, security, 
        health, etc.;
           Franchisors . . .;
           Banks or other lenders whose financing terms 
        may require certain performance measurements;
           Any company that negotiates specific quality 
        or product requirements;
           Any company that grants access to its 
        facilities for a contractor to perform services there, 
        and then continuously regulates the contractor's access 
        to the property for the duration of the contract;
           Any company that is concerned about the 
        quality of the contracted services;
           Consumers or small businesses who dictate 
        times, manner, and some methods of performance of 
        contracts.\43\
---------------------------------------------------------------------------
    \43\BFI, 362 NLRB No. 186, slip op. at 37 (Miscimarra and Johnson, 
Members, dissenting).

    Testifying before the HELP Subcommittee, labor attorney 
Jeffrey Mintz also warned of the decision's vast implications. 
As he noted, ``In addition to franchise businesses, a revised 
standard would affect relationships and have potential economic 
consequence within supply chains, dealer networks and staffing 
companies.''\44\ Labor attorney Marcel Debruge further 
explained to the subcommittee that many automakers rely on the 
flexibility of temporary workers to survive during economic 
downturns, but they will likely be unable to continue this 
practice under the new joint employer standard.\45\ The new 
standard thus has the potential to interfere with countless 
business relationships.
---------------------------------------------------------------------------
    \44\Mintz Written Testimony at 7.
    \45\Debruge Written Testimony at 4-5.
---------------------------------------------------------------------------

                             POST-BFI CASES

    The Board will soon begin applying the expanded joint 
employer standard to subsequent cases, as the NLRB general 
counsel and regional directors already have. For example, on 
November 5, 2015, the Board granted review of a regional 
director's dismissal of the union's petition seeking to 
represent workers it claimed were jointly employed by a 
construction company and a staffing company.\46\ The grant of 
review indicates the Board may reverse the regional director's 
decision and find joint employer status. In April 2015, the 
NLRB's Associate General Counsel for the Division of Advice 
issued an advice memorandum in Nutritionality, Inc. d/b/a/ 
Freshii, concluding the franchisor was not a joint employer 
with its franchisees under both the pre-BFI standard and the 
new standard proposed by the general counsel in BFI.\47\ 
However, the memorandum tells us little about future Board 
decisions. As former Board member Charles Cohen pointed out to 
the HELP Subcommittee, the memorandum is not binding on the 
Board and has no precedential value.\48\ A single, fact-
specific, non-binding advice memorandum is not evidence of 
anything but the narrow, prosecutorial decision made in that 
case. Moreover, this same general counsel has found merit and 
issued complaints in nearly 100 unfair labor practice charges 
alleging McDonald's USA LLC is a joint employer with its 
franchisees.\49\
---------------------------------------------------------------------------
    \46\Retro Environmental, Inc./Green JobWorks, LLC, Case 05-RC-
153468 (NLRB Nov. 5, 2015) (order granting petitioner's request for 
review of regional director's decision and order).
    \47\Advice Mem., NLRB Office of the Gen. Counsel, Div. of Advice, 
Case Nos. 13-CA-134294, 13-CA-138293, and 13-CA-142297 (Apr. 28, 2015).
    \48\Protecting Local Business Opportunity Act: Hearing on H.R. 3459 
Before the House Subcomm. on Health, Employment, Labor, and Pensions, 
Comm. on Educ. and the Workforce, 114th Cong. (Sept. 29, 2015) (oral 
testimony of Charles Cohen).
    \49\See NLRB, McDonald's Fact Sheet, https://www.nlrb.gov/news-
outreach/fact-sheets/mcdonalds-fact-sheet.
---------------------------------------------------------------------------

  LEGISLATION IS NEEDED TO ADDRESS THE ACTIONS OF THE NATIONAL LABOR 
                            RELATIONS BOARD

    Congress is responsible for establishing and revising 
standards in federal labor law. The NLRB's decision in BFI 
threatens the independence of small businesses and takes away 
opportunities for many Americans to own a business. The BFI 
decision extends liability to entities that have never been 
considered joint employers under the NLRA. The Protecting Local 
Business Opportunity Act will return certainty and 
predictability back to consumers, employees, and employers by 
reinstating the previous joint employer standard enjoyed for 
decades prior to BFI. H.R. 3459 will clarify that two or more 
employers will be considered joint employers under the NLRA 
only if each employer shares and exercises actual, direct, and 
immediate control over essential terms and conditions of 
employment.

                               CONCLUSION

    Over the last several years, the NLRB has issued multiple 
decisions and rules intended to benefit organized labor. By 
redefining what it means to be a joint employer, the NLRB has 
discarded decades of labor policy and set a dangerous precedent 
that will lead to higher costs for consumers, fewer jobs for 
workers, and less opportunity for individuals to realize the 
dream of owning a small business. The Protecting Local Business 
Opportunity Act will restore policies in place long before the 
NLRB's most recent radical decision. This commonsense proposal 
will roll back a decision that will wreak havoc on working 
families and small business owners across the country. This 
bill will restore balance to labor relations by preventing the 
disruption of countless small businesses--franchises, 
contractors, subcontractors, and other independent businesses--
and allow future entrepreneurs to pursue the American Dream.

                      Section-by-Section Analysis

    The following is a section-by-section analysis of the 
Protecting Local Business Opportunity Act as reported favorably 
by the Committee.
    Section 1. Provides that the short title is the 
``Protecting Local Business Opportunity Act.''
    Section 2. Amends the National Labor Relations Act to allow 
two or more employers to be considered joint employers for 
purposes of the Act only if each shares and exercises control 
over essential terms and conditions of employment and such 
control over these matters is actual, direct, and immediate.

                       Explanation of Amendments

    The amendments, including the amendment in the nature of a 
substitute, are explained in the body of this report.

              Application of Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1 requires a 
description of the application of this bill to the legislative 
branch. H.R. 3459 codifies the standard used by the Board prior 
to August 27, 2015, by amending the NLRA to provide that two or 
more employers are joint employers only if each shares and 
exercises actual, direct, and immediate control over the 
essential terms and conditions of employment.

                       Unfunded Mandate Statement

    Section 423 of the Congressional Budget and Impoundment 
Control Act (as amended by Section 101(a)(2) of the Unfunded 
Mandates Reform Act, P.L. 104-4) requires a statement of 
whether the provisions of the reported bill include unfunded 
mandates. This issue is addressed in the CBO letter.

                           Earmark Statement

    H.R. 3459 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of House rule XXI.

                            Roll Call Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee Report to include for 
each record vote on a motion to report the measure or matter 
and on any amendments offered to the measure or matter the 
total number of votes for and against and the names of the 
Members voting for and against.


         Statement of General Performance Goals and Objectives

    In accordance with clause (3)(c) of House rule XIII, the 
goal of H.R. 3459 is to protect small businesses such as 
franchisees and subcontractors by restoring the long-held 
standard for determining ``joint employer'' status under the 
NLRA.

                    Duplication of Federal Programs

    No provision of H.R. 3459 establishes or reauthorizes a 
program of the Federal Government known to be duplicative of 
another Federal program, a program that was included in any 
report from the Government Accountability Office to Congress 
pursuant to section 21 of Public Law 111-139, or a program 
related to a program identified in the most recent Catalog of 
Federal Domestic Assistance.

                  Disclosure of Directed Rule Makings

    The committee estimates that enacting H.R. 3459 does not 
specifically direct the completion of any specific rule makings 
within the meaning of 5 U.S.C. 551.

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
the committee's oversight findings and recommendations are 
reflected in the body of this report.

               New Budget Authority and CBO Cost Estimate

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the Rules of the House of Representatives and section 
308(a) of the Congressional Budget Act of 1974 and with respect 
to requirements of clause 3(c)(3) of rule XIII of the Rules of 
the House of Representatives and section 402 of the 
Congressional Budget Act of 1974, the committee has received 
the following estimate for H.R. 3459 from the Director of the 
Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, November 12, 2015.
Hon. John Kline,
Chairman, Committee on Education and the Workforce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3459, the 
Protecting Local Business Opportunity Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Christina 
Hawley Anthony, who can be reached at 226-2820.
            Sincerely,
                                                        Keith Hall.
    Enclosure.

H.R. 3459--Protecting Local Business Opportunity Act

    H.R. 3459 would amend the National Labor Relations Act 
(NLRA) to define ``joint employer'' to mean two or more 
employers who each share ``actual, direct, and immediate 
control'' over the terms and conditions of employment. In a 
recent ruling by the National Labor Relations Board, the Board 
concluded a ``joint employer'' relationship could be 
established when an employer exercises control over employment 
matters indirectly or such control is reserved to an employer 
by contract. In that ruling, the Board found that a company 
that had contracted with a staffing agency was a ``joint 
employer'' of the contract employees because the company had 
reserved the right to control some of the terms and conditions 
of their employment in its contract with the staffing agency. 
The bill would make it less likely that companies with similar 
contracting arrangements would be considered ``joint 
employers'' under the NLRA and, therefore, less likely such 
companies would be subject to collective bargaining and 
provisions related to unfair labor practices.
    Implementing the bill would not affect the operations of 
federal and state agencies because the NLRA excludes federal 
governmental entities as well as states and political 
subdivisions of states from the definition of ``employer'' 
under the act.
    Enacting H.R. 3459 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply. CBO 
estimates that enacting H.R. 3459 would not increase net direct 
spending or on-budget deficits in any of the four consecutive 
10-year periods beginning in 2026.
    H.R. 3459 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contact for this estimate is Christina Hawley 
Anthony. The estimate was approved by H. Samuel Papenfuss, 
Deputy Assistant Director for Budget Analysis.

                        Committee Cost Estimate

    Clause 3(d)(1) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison of the 
costs that would be incurred in carrying out H.R. 3459. 
However, clause 3(d)(2)(B) of that rule provides that this 
requirement does not apply when the committee has included in 
its report a timely submitted cost estimate of the bill 
prepared by the Director of the Congressional Budget Office 
under section 402 of the Congressional Budget Act.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italic and existing law in which no change is 
proposed is shown in roman):

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italic and existing law in which no change is 
proposed is shown in roman):

                      NATIONAL LABOR RELATIONS ACT




           *       *       *       *       *       *       *
                              definitions

  Sec. 2. When used in this Act--
  (1) The term ``person'' includes one or more individuals, 
labor organizations, partnerships, associations, corporations, 
legal representatives, trustees, trustees in cases under title 
11 of the United States Code, or receivers.
  (2) The term ``employer'' includes any person acting as an 
agent of an employer, directly or indirectly, but shall not 
include the United States or any wholly owned Government 
corporation, or any Federal Reserve Bank, or any State or 
political subdivision thereof, or any person subject to the 
Railway Labor Act, as amended from time to time, or any labor 
organization (other than when acting as an employer), or anyone 
acting in the capacity of officer or agent of such labor 
organization. Notwithstanding any other provision of this Act, 
two or more employers may be considered joint employers for 
purposes of this Act only if each employer shares and exercises 
control over essential terms and conditions of employment and 
such control over these matters is actual, direct, and 
immediate.
  (3) The term ``employee'' shall include any employee, and 
shall not be limited to the employees of a particular employer, 
unless the Act explicitly states otherwise, and shall include 
any individual whose work has ceased as a consequence of, or in 
connection with, any current labor dispute or because of any 
unfair labor practice, and who has not obtained any other 
regular and substantially equivalent employment, but shall not 
include any individual employed as an agricultural laborer, or 
in the domestic service of any family or person at his home, or 
any individual employed by his parent or spouse, or any 
individual having the status of an independent contractor, or 
any individual employed as a supervisor, or any individual 
employed by an employer subject to the Railway Labor Act, as 
amended from time to time, or by any other person who is not an 
employer as herein defined.
  (4) The term ``representatives'' includes any individual or 
labor organization.
  (5) The term ``labor organization'' means any organization of 
any kind, or any agency or employee representation committee or 
plan, in which employees participate and which exists for the 
purpose, in whole or in part, of dealing with employers 
concerning grievances, labor disputes, wages, rates of pay, 
hours of employment, or conditions of work.
  (6) The term ``commerce'' means trade, traffic, commerce, 
transportation, or communication among the several States, or 
between the District of Columbia or any Territory of the United 
States and any State or other Territory, or between any foreign 
country and any State, Territory, or the District of Columbia, 
or within the District of Columbia or any Territory, or between 
points in the same State but through any other State or any 
Territory or the District of Columbia or any foreign country.
  (7) The term ``affecting commerce'' means in commerce, or 
burdening or obstructing commerce or the free flow of commerce, 
or having led or tending to lead to a labor dispute burdening 
or obstructing commerce or the free flow of commerce.
  (8) The term ``unfair labor practice'' means any unfair labor 
practice listed in section 8.
  (9) The term ``labor dispute'' includes any controversy 
concerning terms, tenure or conditions of employment, or 
concerning the association or representation of persons in 
negotiating, fixing, maintaining, changing, or seeking to 
arrange terms or conditions of employment, regardless of 
whether the disputants stand in the proximate relation of 
employer and employee.
  (10) The term ``National Labor Relations Board'' means the 
National Labor Relations Board provided for in section 3 of 
this Act.
  (11) The term ``supervisor'' means any individual having 
authority, in the interest of the employer, to hire, transfer, 
suspend, lay off, recall, promote, discharge, assign, reward, 
or discipline other employees, or responsibly to direct them, 
or to adjust their grievances, or effectively to recommend such 
action, if in connection with the foregoing the exercise of 
such authority is not of a merely routine or clerical nature, 
but requires the use of independent judgment.
  (12) The term ``professional employee'' means--
          (a) any employee engaged in work (i) predominantly 
        intellectual and varied in character as opposed to 
        routine mental, manual, mechanical, or physical work; 
        (ii) involving the consistent exercise of discretion 
        and judgment in its performance; (iii) of such a 
        character that the output produced or the result 
        accomplished cannot be standardized in relation to a 
        given period of time; (iv) requiring knowledge of an 
        advanced type in a field of science or learning 
        customarily acquired by a prolonged course of 
        specialized intellectual instruction and study in an 
        institution of higher learning or a hospital, as 
        distinguished from a general academic education or from 
        an apprenticeship or from training in the performance 
        of routine mental, manual, or physical processes; or
          (b) any employee, who (i) has completed the courses 
        of specialized intellectual instruction and study 
        described in clause (iv) of paragraph (a), and (ii) is 
        performing related work under the supervision of a 
        professional person to qualify himself to become a 
        professional employee as defined in paragraph (a).
  (13) In determining whether any person is acting as an 
``agent'' of another person so as to make such other person 
responsible for his acts, the question of whether the specific 
acts performed were actually authorized or subsequently 
ratified shall not be controlling.
  (14) The term ``health care institution'' shall include any 
hospital, convalescent hospital, health maintenance 
organization, health clinic, nursing home, extended care 
facility, or other institution devoted to the care of sick, 
infirm, or aged person.

           *       *       *       *       *       *       *


                             MINORITY VIEWS

    In today's increasingly fissured workplace, characterized 
by a myriad of subcontracting, employee leasing and temporary 
employment arrangements, ``Who is the boss?'' is a relevant 
question when it comes to determining who is accountable for 
bargaining with workers over the terms and conditions of 
employment. The ``Protecting Local Business Opportunity Act'' 
of 2015 (H.R. 3459) allows joint employers who share or 
codetermine employment-related decisions, but exercise that 
control indirectly, to avoid accountability for unfair labor 
practices or collective bargaining obligations under the 
National Labor Relations Act (NLRA). Allowing employers who 
retain the right to control the essential terms and conditions 
of employment to escape responsibility to bargain collectively 
with workers, would essentially eliminate the workers' rights 
under the NLRA.
    The bill narrows the definition of ``employer'' under 
Section 2(2) of the NLRA (29 U.S.C. 152(2)) to provide that two 
or more employers are ``joint employers'' only if their control 
over the terms and conditions of employment is ``actual, 
direct, and immediate.'' This would replace the longstanding 
common law test which provides that an employer is one ``who 
controls or has the right to control'' the terms and conditions 
of employment, even if that ``right to control'' is not 
exercised.
    This legislation follows closely on the heels of two 
actions by the NLRB over the past year:
          1) The General Counsel of the National Labor 
        Relations Board (NLRB) issued a consolidated complaint 
        against McDonald's USA, as a joint employer, along with 
        its franchisees concerning alleged unfair labor 
        practices in connection with demonstrations as part of 
        the ``Fight for $15 and a Union.'' That case is in the 
        early stages of pre-trial litigation, and its outcome 
        is unknown.\1\
---------------------------------------------------------------------------
    \1\There were 13 complaints issued involving 78 alleged unfair 
labor practice charges. See: ``NLRB Office of the General Counsel 
Issues Consolidated Complaints Against McDonald's Franchisees and their 
Franchisor McDonald's, USA, LLC as Joint Employers,'' NLRB Press 
Release, December 19, 2014.
---------------------------------------------------------------------------
          2) The NLRB's August 27, 2015 decision in Browning 
        Ferris Industries (BFI),\2\ where the Board 
        reinstituted the common law test for determining 
        whether two or more entities are joint employers.
---------------------------------------------------------------------------
    \2\Browning Ferris Industries of California and Teamsters Local 
350, 362 NLRB No. 186 (2015).
---------------------------------------------------------------------------
    The BFI decision re-established a two-pronged test for 
determining if two or more entities are joint employers under 
the NLRA: (1) both are ``employers'' within the meaning of the 
common law; and (2) both share or codetermine those matters 
governing the essential terms and conditions of employment.
    That test had been in place prior to 1984, but had been 
systematically eroded though a series of decisions during the 
Reagan and Bush Administrations that were inconsistent with the 
common law. For example, a 2002 case held that for an entity to 
be a joint employer with another employer, it must exercise 
``direct and immediate'' control. This was a new test that the 
Board applied without any explanation or even acknowledgment. 
Moreover, this new test was squarely at odds with the common 
law definition of employer.\3\
---------------------------------------------------------------------------
    \3\See: Airborne Express, 338 NLRB 597 (2002) (The essential 
element in this analysis is whether a putative joint employer's control 
over employment matters is ``direct and immediate.'')
---------------------------------------------------------------------------

THE PURPORTED NEED FOR LEGISLATION TO PROTECT FRANCHISEES' INDEPENDENCE 
  IS CONTRADICTED BY TESTIMONY AT THE SEPTEMBER 29, 2015 LEGISLATIVE 
                                HEARING

    The Majority's justification for this legislation is that 
the BFI decision will cause franchisees to lose control over 
their small businesses, and that the Board's decision thus 
``threatens to steal the American dream from the owners of the 
nation's 780,000 franchise businesses and millions of 
contractors.''\4\ This argument is premised on the belief that 
the BFI decision established a precedent that will allow the 
NLRB to decide that McDonald's USA is a joint employer with its 
franchisees, and therefore all franchisors will become liable 
as joint employers with their franchisees. In turn, the 
proponents hypothesize that this would spur franchisors to take 
over the day-to-day management of their franchisees as a means 
of limiting the potential liability created by their 
franchisees. This view is divorced from reality.
---------------------------------------------------------------------------
    \4\Press Release, Education and the Workforce Committee, September 
9, 2015, on the introduction of H.R. 3459.
---------------------------------------------------------------------------
    First, contrary to the overheated hyperbole that the BFI 
decision is ``designed'' to ``eradicate franchising and 
irreparably damage every small business built on the franchise 
model,''\5\ the NLRB takes a reasoned, case-by-case approach 
when assessing whether a franchisor is joint employer. For 
example, the NLRB's General Counsel (GC) recently determined 
that Freshii's, a fast-casual restaurant franchisor with over 
100 stores in over a dozen countries, would not be deemed to be 
a joint employer of its franchisees, because its control was 
limited to maintaining brand standards and food quality. 
Freshii's Operations Manual, which discusses employment 
policies, is optional. This NLRB guidance was published as an 
Advice Memorandum.\6\
---------------------------------------------------------------------------
    \5\Testimony of Fred Weir, President of Meadowbrook Restaurant Co., 
Inc., before the Subcommittee on Health, Employment, Labor and 
Pensions, Committee on Education and the Workforce, U.S. House of 
Representatives, August 27, 2015, pp. 2. Mr. Weir testified on behalf 
of the Coalition to Save Local Businesses (CSLB) and the International 
Franchise Association (IFA).
    \6\See: Nutritionality, Inc., d/b/a Freshii, Case 13-CA -134294 et 
al., Advice Memorandum, April 28, 2015. http://apps.nlrb.gov/link/
document.aspx/09031d4581c23996.
---------------------------------------------------------------------------
    Second, the argument that franchisees would be swallowed up 
by their franchisors because of the BFI decision was undermined 
by franchisee testimony at the September 29, 2015, legislative 
hearing on H.R. 3459 before the Subcommittee on Health, 
Employment, Labor and Pensions (HELP) of the Committee on 
Education and the Workforce.
    The two franchisee witnesses--a Burger King franchisee and 
a franchisee who operated six Nothing Bundt Cakes bakeries--
testified that they feared the BFI decision would cause their 
franchisors to take over employee relations at their 
franchisees in order to limit the franchisor's joint employer 
liability. However, in response to questioning, both testified 
that they have absolute and total control over their employment 
policies, and that their respective franchisors do not exercise 
control over their business operations or have the right to 
exercise such control.
          Statement by Mara Fortin (owner and operator of 
        Nothing Bundt Cakes franchises): ``I hire my own 
        workers, set their wages, benefit packages, et cetera. 
        I manage my inventory and I purchase equipment. I pay 
        taxes as my own small business with my own employer 
        identification numbers. And I help my employees when 
        they are in need of assistance.
          My franchisor plays no part in any of these key 
        functions that only a true and sole employer 
        performs.''

          Q. by Rep. Guthrie: ``Do you or do [sic] the 
        franchisor hire and fire and determine the work of your 
        employees?''
          A. by Mr. Braddy (owner and operator of a Burger King 
        franchise): ``I schedule interviews every other 
        Wednesday. I sit down with eight people every other 
        Wednesday. Even though I am not hiring, I do the 
        interviews because I always like to have a waiting list 
        of people who want to work.
          So I do all the hiring. I don't allow my managers or 
        my assistants to terminate anyone because I want to 
        make sure that once I let someone go it is for a good 
        reason.''

          Q. by Rep. Guthrie: ``But it is you as the business 
        owner, not the--what role does the franchisor play in 
        any of your--those issues?''
          A. by Mr. Braddy: ``None at all.''
          Q. by Rep. Guthrie: ``None at all. Thank you. My time 
        expired.''
    Any unbiased reading of the BFI decision would not find 
these franchisees joint employers with their respective 
franchisors.
    Franchisees also contended that a contracting relationship 
where there is ``potential control'' could establish a joint 
employment liability.
          Testimony of Mr. Braddy: ``In fact, the recent NLRB 
        ruling in Browning-Ferris Industries of California, 
        Inc., would allow those who indirectly affect my 
        business--such as my landscapers and waste disposal 
        company--to become my joint employer.''

          Q. by Rep. Polis: ``I also want to go to Ms. Fortin. 
        Now, in your case, from your testimony, you said the 
        real-world consequences of the NLRB's decision is it 
        would lead to consolidation among our franchisors and 
        loss of autonomy for local franchise business 
        operations.
          My question is, how do you get that out of the BFI 
        case, if it has to do with contractors? Or are you just 
        talking about a hypothetical outcome for other cases 
        that might be pending?''
          A. by Ms. Fortin: ``I mean, I don't think anyone here 
        can truly answer what is going to happen. I look at 
        words like ``indirect,'' ``reserved,'' ``potential.'' 
        Any contractual relationship at that point is on the 
        table.''
    It is a misreading of the Majority opinion in the BFI case 
to state that mere ``potential control'' or that ``any 
contractual relationship'' raises the possibility of joint 
employer liability. In fact, the Board rejected the General 
Counsel's recommendation that ``potential control'' of labor 
relations may be sufficient to ground a joint employer 
relationship or ``where industrial realities'' make an entity 
essential for meaningful bargaining.'' Rather, the Board 
Majority adopted the common law test that found the ``right to 
control'' labor relations necessary to ground a joint employer 
relationship if, for instance, such a right is enshrined in a 
contract between a contractor and sub-contractor. A ``right to 
control'' is a legal, not an economic concept.
    What has created confusion is a misleading dissent in the 
BFI decision which proclaimed that the Majority opinion had 
adopted a ``potential control'' standard that would, among 
other things, treat parent corporations and their subsidiaries 
as joint employers. However, the Majority specifically declined 
to address that circumstance, or franchisor-franchisee law, and 
in no way adopted a ``potential control'' test. Instead, as 
required by the Taft-Hartley Act, the Board tethered joint 
employer law to the common law and limited its decision to the 
facts before it.

  THE LEGISLATIVE HEARING REVEALED THAT H.R. 3459 CREATES A PERVERSE 
         INCENTIVE THAT WOULD UNDERMINE FRANCHISEE INDEPENDENCE

    Two witnesses at the September 29 legislative hearing 
pointed out that an unintended effect of H.R. 3459 is that it 
would likely result in franchisors exercising more control over 
their franchisees--the very consequence that the Majority says 
it seeks to avoid. Dr. Ann Lofaso, a Professor of Law from West 
Virginia University, testified:

          ``[O]ne unintended and perverse effect of the 
        proposed legislation is that it can embolden 
        franchisors to take more control over the franchisee's 
        labor relations because it, the franchisor, would have 
        less liability concerns.''

    Michael Harper, professor of law at Boston University and 
reporter for the recently completed Restatement of Employment 
Law, testified:

          ``I think that this legislation, if passed, would 
        send a message that you can--to the franchisors or 
        larger businesses--that you can control the employees 
        of the franchisees if you use the franchisee owners, 
        like Ms. Fortin, as a middle manager.''

    Thus, this bill reduces a franchisor's potential liability 
as a joint employer and gives franchisors greater latitude to 
control the employment practices of their franchisees. Freed 
from liability as a joint employer, this bill will open the 
door for franchisors to exercise greater control over 
franchisees than they could exercise under the common law 
standard.
    As a corollary, the BFI decision benefits franchisees who 
want autonomy to manage their employment practices, because 
franchisors who involve themselves in their franchisees' labor 
relations will risk incurring a bargaining obligation and/or 
other liability under the NLRA. That potential liability will 
incentivize franchisors to distance themselves from control 
over their franchisees' labor relations.
    That point was underscored by Professor Harper in his 
written testimony:

        ``[t]he BFI decision should help protect the 
        decentralized franchise model by encouraging 
        franchisors to continue to rely on independent 
        franchisee control of employment decisions.''

FRANCHISING FLOURISHED UNDER THE TRADITIONAL JOINT EMPLOYER TEST PRIOR 
                                TO 1984

    The BFI decision does not ``upend a franchise model that 
has worked well for decades.''\7\ Prior to 1984, franchisors 
faced the same legal landscape on the joint employer issue as 
that established under BFI, and none of the disasters arose 
that are being predicted by the advocates of this legislation. 
In fact, the franchising model flourished during that time. As 
Professor Harper testified, this fact undermines the claim that 
the BFI decision somehow threatens franchising or other 
efficient forms of business cooperation.
---------------------------------------------------------------------------
    \7\U.S. Representative Phil Roe (R-TN) Press Release, August 27, 
2015.
---------------------------------------------------------------------------
    Moreover, if a franchisor wants to avoid joint employer 
status, it can simply modify its franchising agreement so that 
it does not have sufficient control of the employees' terms and 
conditions to incur an obligation to bargain. As Professor 
Harper testified at the hearing:

          ``If a franchisor continues to delegate authority 
        over all employment decisions to its franchisees, and 
        retains no right to control scheduling or work pace or 
        other conditions of employment, it cannot be subject to 
        bargaining obligations.''

  THE HISTORY OF THE NLRB'S JOINT EMPLOYER STANDARD IS ROOTED IN THE 
                        TAFT-HARTLEY ACT OF 1947

    Among the ``employers'' who may be joint employers under 
the NLRA are those employers who, while contracting with an 
otherwise independent company, have retained for themselves 
sufficient control over the ``essential terms and conditions of 
employment'' that the two companies share or codetermine those 
matters.\8\
---------------------------------------------------------------------------
    \8\``Essential terms and conditions of employment'' include hiring, 
firing, discipline, supervision, and direction. It can also include 
dictating the number of employees to be supplied; controlling 
scheduling, seniority, and overtime; assigning work; and determining 
the manner and method of work performance.
---------------------------------------------------------------------------
    The policy question is how much control is required for an 
entity to be deemed an ``employer''. Congress and the courts 
have relied upon the common law to help answer the question of 
who is an ``employer'' in an employment relationship.
    The legislative history of the Taft-Hartley Act of 1947, a 
law intended to reduce the economic power of unions, stated 
that the definition of an employment relationship should be 
governed by the common law principles of agency.\9\ In 1968, 
the Supreme Court stated that the ``common law agency test'' 
should be applied in establishing whether there is an 
employment relationship under the NLRA.\10\
---------------------------------------------------------------------------
    \9\Congressional Record, Senate, at 1575-1576 (1947), reprinted in 
2 Legislative History of the Labor Management Relations Act, 1947, 51 
(1948), and House Conf. Rep. No. 510 on H.R. 3020 at 36 (1947) 
reprinted in 1 Legislative History of the Labor Management Relations 
Act, 1947, at 540 (1948).
    \10\NLRB v United Insurance 390 U.S. 254 (1968).
---------------------------------------------------------------------------
    As far back as 1933, the Restatement of Agency defines an 
employer as one who ``controls or has the right to control the 
physical conduct of the other in the performance of the 
service.\11\ Thus, under the common law, the employer does not 
need to exercise direct and immediate control in order to 
determine the essential terms and conditions of employment, 
because the putative employer (the one purchasing labor 
services from another entity) can indirectly determine working 
conditions through contractual arrangements, such as setting 
salary caps on what the supplier of labor may pay its 
employees--whether such control is exercised or not.
---------------------------------------------------------------------------
    \11\See RESTATEMENT OF THE LAW OF AGENCY 1933, Sec. 2(1); see also 
RESTATEMENT (SECOND) OF AGENCY 1958, Sec. 2(1).
---------------------------------------------------------------------------
    In 1982, the Third Circuit Court of Appeals reaffirmed that 
where two or more employers exert significant control over the 
same employees and the evidence shows that they share or co-
determine those matters governing essential terms and 
conditions of employment, they constitute ``joint employers'' 
within the meaning of the NLRA.\12\ Yet two years later, 
beginning in 1984 (during the Reagan era) and for the next 30 
years the NLRB began to narrow the joint employer standard to 
eliminate any consideration of evidence of the putative 
employer's right to control, and by 2002 (under the Bush 
administration) the NLRB required that the putative employer's 
control must be ``direct and immediate.''\13\
---------------------------------------------------------------------------
    \12\NLRB v. Browning Ferris Industries of Pennsylvania, Inc. 691 
F.2d 1117, 1122-1123 (3rd Cir. 1982).
    \13\Airborne Express, 338 NLRB 597 (2002) (discussing whether a 
joint employer's control is direct and immediate).
---------------------------------------------------------------------------
    Given the explosive growth of outsourcing, leasing and 
contingent work, and its responsibility to apply the NLRA to 
the ``complexities of industrial life,'' it was prudent for the 
NLRB to re-examine the joint employer test in BFI case and 
determine whether the traditional test for a joint employer 
that was in place prior to 1984 should be reinstated.

  THE BFI DECISION APPROPRIATELY REJECTED THE ``DIRECT AND IMMEDIATE 
  CONTROL'' TEST AND REINSTATED THE LONGSTANDING AND MORE PREDICTABLE 
            COMMON LAW TEST OF THE ``RIGHT TO CONTROL'' TEST

    BFI operates a municipal recycling facility in Milpitas, 
California, but contracted with Leadpoint Business Services to 
hire many of the workers who carry out the sorting of 
recyclable materials under a cost reimbursement contract. BFI 
also employs 60 of its own employees at this facility. 
Teamsters Local Union sought to organize 240 Leadpoint workers, 
and named BFI as a joint employer in the petition for an 
election.
    In determining whether BFI and Leadpoint were joint 
employers, the NLRB followed the common law agency test as set 
forth in the Restatement of Agency. It states that an 
``employer'' is someone who ``controls or has the right to 
control'' the essential terms and condition of employment.
    The NLRB found that BFI, while not directly employing the 
workers sorting recyclables, capped the maximum wage that 
Leadpoint could pay to its workers at a rate that could not 
exceed what BFI paid its own workers doing comparable work. BFI 
also set the line speed, assigned work to Leadpoint employees 
ahead of assignments made by Leadpoint, and retained the right 
to reject the hiring of any Leadpoint employee ``for any reason 
or no reason.'' As such, BFI codetermined hiring and 
disciplinary practices. Without compelling BFI to the 
bargaining table, the NLRB found that an essential party to 
negotiations would be missing. BFI is now challenging this 
decision.\14\
---------------------------------------------------------------------------
    \14\NLRB issued an unfair labor practice complaint against BFI for 
its refusal to recognize or bargain with the union as a joint employer 
on October 23, 2015 (32-CA-160759).
---------------------------------------------------------------------------
    Proponents of this legislation dispute that the BFI 
decision merely returns to the pre-1984 holdings based on the 
common law test, and that pre-1984 cases show that actual 
control must be exercised in order for there to be a joint 
employer relationship, not simply the right to control. Former 
NLRB Member Charles Cohen testified at the legislative hearing 
that in ``almost all'' of the prior cases there was evidence of 
actual control by the joint employer. Unfortunately, Mr. Cohen 
did not provide any citations to support that contention in his 
testimony, and a review of pre-1984 joint employer cases finds 
a number where the ``right to control'' was used as the indicia 
of control over labor relations.
     In the 1968 Southland Corporation, d/b/a Speedee 
7-Eleven, case\15\ the Board applied the same common law 
``right to control'' test that the Board applied in BFI in 
finding that a franchisor was not a joint employer with a 
franchisee. The decision stated:
---------------------------------------------------------------------------
    \15\170 NLRB 1332 (1968).

          ``We have long held that the critical factor in 
        determining whether a joint employer relationship 
        exists is the control which one party exercises over 
        the labor relations policy of the other. It is 
        immaterial whether this control be actually exercised 
        so long as it may potentially be exercised by virtue of 
---------------------------------------------------------------------------
        the agreement under which the parties operate.''

    This case is very similar to the facts and result in 
Freshii. As in Freshii, the franchisee was independently 
responsible for hiring, firing, discipline and all labor 
relations. Likewise, in both cases there was a very detailed 
policy manual covering operations and employee relations; 
however, there was no evidence that the franchisees were 
required to follow the recommendations contained therein.
     In Hoskins Ready-Mix Concrete the Board affirmed 
that both the actual exercise of control set forth in a 
contract, as well as the power retained in a contract to 
exercise ``overall supervision and direction'' but not 
exercised, are separate indicia, and are each sufficient to 
find that an entity is a ``co-employer.''\16\
---------------------------------------------------------------------------
    \16\161 NLRB 1492, 1493 n.2 (1966).
---------------------------------------------------------------------------
     In Jewel Tea Co. a joint employer relationship was 
found because, although not exercised, a license agreement gave 
the Licensor ``the power to control effectively the hire, 
discharge, wages, hours, terms and other conditions of 
employment'' of the employees of licensees who conducted retail 
operations in Jewel Tea Company's retail outlets. The Board 
stated:

          ``That the licensor has not exercised such power is 
        not material, for an operative predicate for 
        establishing a joint employer relationship is a 
        reserved right in the licensor to exercise such control 
        . . .''\17\
---------------------------------------------------------------------------
    \17\162 NLRB 508, 509-10 (1966).

    These cases show a consistency in reasoning over the 
breadth of almost seven decades. They also rebut the argument 
that the Board expanded the definition of an employer beyond 
its traditional common law moorings.

             THE ELEPHANT IN THE ROOM: THE MCDONALD'S CASE

    Despite the very narrow focus of the BFI decision on a 
subcontracting relationship, franchisors are whipping up a 
controversy with their franchisees where none really exists. 
The BFI decision itself may have gone by barely noticed were it 
not for the unfair labor practice complaints against McDonald's 
USA and dozens of its franchisees following a series of strikes 
and protests to increase pressure to raise the minimum wage and 
secure union representation for McDonald's fast food workers as 
part of the ``Fight for 15 and a Union'' campaign.
    The complaints alleged that McDonald's USA and a number of 
its franchisees violated the NLRA by, among other things, 
threatening, discharging and disciplining employees in 
retaliation for engaging in union activity. McDonald's USA was 
named a joint employer because it allegedly exercises 
significant control over the franchisee employees' terms and 
condition of employment.
    As opposed to the Freshii's case noted above, the NLRB's 
General Counsel contends that McDonald's control goes beyond 
what is necessary to accommodate a franchisor's legitimate 
interest in protecting its brand. Importantly, the issuance of 
a complaint does not constitute the Agency's final 
determination, and this matter is now in litigation before an 
Administrative Law Judge.
    Thus, any conclusions about what the McDonald's case means 
for franchisees is premature, and any rush to legislate at this 
time is equally premature. Representative Jared Polis, Ranking 
Member of the HELP Subcommittee, stated at the conclusion of 
the legislative hearing:

          ``I think it is important the National Labor 
        Relations Board follow their process, including in the 
        pending McDonald's case, without Congress prejudging 
        their motives or undermining their authority before a 
        decision is made.
          Once there is a ruling, I look forward to convening 
        again and seeing whether there is any legitimacy to the 
        fear that some of you have expressed with regard to the 
        practices of your franchisees or franchisors. If there 
        is, I think you will find great sympathy on both sides 
        of the aisle; if not, then those fears are largely 
        unwarranted and the [BFI decision] will not have any 
        impact at all on your business.''

THE CONTINGENT WORKFORCE IS PROLIFERATING, COMPELLING A RE-EXAMINATION 
 OF THE INDUSTRIAL REALITIES CONFRONTING MILLIONS OF AMERICAN WORKERS 
         WHO WORK FOR TEMPORARY OR PERMANENT STAFFING AGENCIES

    The contingent workforce, i.e., temporary or part-time 
workers, and employees working under contract for a specific 
period or project, has steadily increased in prominence in the 
U.S. economy over the past several decades. Before the 1970s, 
temporary employment agencies generally only offered short-term 
secretarial help, day laborers, and nursing services, and did 
not represent a statistically significant portion of private 
sector employment. Around 1975, however, ``temporary employment 
agencies began to provide workers for many different types of 
jobs, including maintenance work, custodial services, legal 
services, and computer programming,'' and thereafter began to 
experience tremendous growth.\18\ The temporary help services 
industry--a subset of the overall contingent workforce--grew 
from 518,000 to 1,032,000 workers during the 1980s, and reached 
over 1% of total employment by 1990. The percentage doubled to 
2% by 2000.\19\ In 2013, there were approximately 3.4 million 
jobs in this staffing sector, accounting for 2.5% of U.S. 
employment.\20\ In February 2015, the most recent Bureau of 
Labor Statistics survey indicated that overall contingent 
workers accounted for as much as 4.1% of all employment, or 5.7 
million workers.\21\
---------------------------------------------------------------------------
    \18\From Widgets to Digits: Employment Regulation for the Changing 
Workplace, Katherine Stone, pp. 67 (2004).
    \19\See Id. See also U.S. Bureau of Labor Stat., Luo, et al., The 
Expanding Role of Temporary Help Services from 1990 to 2008, Monthly 
Lab. Rev., August 2010, at 3, 4.
    \20\WHO'S THE BOSS: Restoring Accountability for Labor Standards in 
Outsourced Work, National Employment Law Project, Catherine 
Ruckelshaus, Rebecca Smith, Sarah Leberstein, Eunie Cho, pp. 19 (May 
2014).
    \21\U.S. Bureau of Labor Statistics, Contingent and Alternative 
Employment Arrangements, February 2005.
---------------------------------------------------------------------------
    Contingent work arrangements involve a supplier of 
temporary help, a firm who ``assigns'' workers to a user firm, 
while the temporary help firm ``place[s] these workers for 
legal purposes on [its] own payroll, billing client firms in an 
amount covering wages, overhead, and profit.'' \22\ This 
``pushes liability for adherence to a range of workplace 
statutes . . . outward to other businesses.''\23\ The user firm 
can influence the supplier firm's bargaining posture by 
threatening to cancel its contract with the supplier firm if 
wages and benefits rise above a set cost threshold.
---------------------------------------------------------------------------
    \22\The Contest Over ``Employer'' Status in the Postwar United 
States: The Case of Temporary Help Firms, George Gonos, 31 L. & Soc'ty 
Rev. 81, 84-85 (1997). See also Stone, at, p. 68; Edward A. Lenz, Co-
Employment--A Review of Customer Liability Issues in the Staffing 
Services Industry, 10 The Lab. Law. 195, 196-99 (1994) (describing 
various contingent employment arrangements).
    \23\Enforcing Labor Standards in Fissured Workplaces: The U.S. 
Experience, David Weil, 22 THE ECON. & L. REL. REV. 33, 36-37 (2011).
---------------------------------------------------------------------------
    These developments, coupled with the facts of the BFI case, 
provided ample reason for the NLRB to revisit the joint 
employer standard. As the BFI decision stated:

          ``[T]he primary function and responsibility of the 
        Board . . . is that `of applying the general provisions 
        of the Act to the complexities of industrial life.' If 
        the current joint-employer standard is narrower than 
        statutorily necessary and if joint-employment 
        arrangements are increasing, the risk is increased that 
        the Board is failing in what the Supreme Court has 
        described as the Board's ``responsibility to adapt the 
        Act to the changing patterns of industrial life.''\24\
---------------------------------------------------------------------------
    \24\Browning Ferris Industries of California and Teamsters Local 
350, 362 NLRB No. 186 (2015)
---------------------------------------------------------------------------

 H.R. 3459 CREATES AMBIGUITY IN THE NLRA'S DEFINITION OF EMPLOYER AND 
           JOINT EMPLOYER AND WILL SPAWN NEEDLESS UNCERTAINTY

    As noted above, the legislative history of the Taft-Hartley 
Act stated that the definition of an employment relationship 
should be governed by the common law principles of agency.\25\ 
Under the Restatement of Agency, an ``employer'' is one who 
``controls or has the right to control the physical conduct of 
the other in the performance of the service.'' That definition 
is rooted in hundreds of years of common law. In contrast, H.R. 
3459 creates a new test, requiring that a joint employer's 
control must be ``actual, direct and immediate.'' The common 
law does not define these terms and they are not explained in 
Airborne Express, the 2002 NLRB case from which they are 
taken.\26\
---------------------------------------------------------------------------
    \25\Congressional Record, Senate, at 1575-1576 (1947), reprinted in 
2 Legislative History of the Labor Management Relations Act, 1947, 51 
(1948), and House Conf. Rep. No. 510 on H.R. 3020 at 36 (1947) 
reprinted in 1 Legislative History of the Labor Management Relations 
Act, 1947, at 540 (1948).
    \26\See: Footnote 12
---------------------------------------------------------------------------
    The definition of joint employer under H.R. 3459 creates 
great uncertainty. Franchisees operating under the same 
franchise agreement may be treated differently based on whether 
the franchisor has recently exercised its control over some, 
but not others. And a franchisor may be a joint employer with a 
franchise today, but not tomorrow based on whether the 
franchisor is still exercising its authority. Rather than 
creating clarity, these terms raise questions: What does it 
mean for control to be ``immediate?'' Is control exercised two 
weeks ago sufficient? Two days? Two minutes? What is ``actual'' 
control? Isn't all control actual, whether or not it is direct? 
Adding these terms to the definition of ``employer'' will 
create uncertainty for employers and employees.

                               AMENDMENTS

    Five amendments were offered by Democratic Members at the 
October 28, 2015 mark-up, as part of an effort to refocus the 
Committee's work on the unaddressed, but pressing needs of the 
American workforce. The legislation offered in these amendments 
is also included in the Working Families Agenda that is being 
promoted by Democrats to boost wages, help workers balance 
their work and family responsibilities, and level the playing 
field by ending workplace discrimination.
          1. Representative Polis offered as a substitute 
        amendment, the Equality Act. The Equality Act adds 
        ``sexual orientation'' and ``gender identity'' to the 
        protections from employment discrimination in Title VII 
        of the Civil Rights Act that already exist based on 
        race, color, religion, sex, and national origin. In 
        addition, the legislation includes protections from 
        discrimination on the basis of sexual orientation or 
        gender identity in housing, public accommodations, 
        federal funding, credit and jury service.
          2. Representative Pocan offered as a substitute 
        amendment, the Workplace Action for a Growing Economy 
        (WAGE) Act. The WAGE Act strengthens protections 
        available to workers under the NLRA by requiring 
        employers to post employee rights under federal labor 
        law; ensures that NLRB orders are enforced without 
        undue delay; and authorizes monetary penalties for 
        unfair labor practices.
          3. Representative Wilson offered as a substitute 
        amendment, the Payroll Fraud Prevention Act. The 
        Payroll Fraud Prevention Act amends the Fair Labor 
        Standards Act (FLSA) to prevent the misclassification 
        of workers as independent contractors that results in 
        lost wages, and makes it a violation of the FLSA to 
        misclassify employees.
          4. Representative Bonamici offered as a substitute 
        amendment, the Schedules That Work Act. The Schedules 
        That Work Act protects all employees from retaliation 
        for requesting a more flexible, predictable or stable 
        schedule; ensures that employers post schedules two 
        weeks in advance; and provides additional pay for 
        certain especially difficult shifts, including call-in 
        shifts, split shifts, and shifts from which employees 
        are sent home early.
          5. Representative Clark offered as a substitute 
        amendment, the Paycheck Fairness Act. The Paycheck 
        Fairness Act will help close the wage gap by 
        strengthening the Equal Pay Act of 1963 in critical 
        ways, including: requiring employers to prove that pay 
        disparities between women and men are job-related and 
        consistent with business necessity, putting the 
        remedies for violations of the Equal Pay Act on par 
        with the remedies for other civil rights violations, 
        and prohibiting retaliation against workers for 
        discussing their pay.
    The Chair ruled these five amendments were non-germane, and 
no vote was taken on the underlying amendments.

                             ROLL CALL VOTE

    H.R. 3459 was reported on a straight party line vote of 21 
ayes and 15 nays.

                               CONCLUSION

    A primary goal of the NLRA is to help to restore the 
equality of bargaining power between employers and employees. 
At a time when there are millions of workers employed under 
arrangements that separate employees from the entity that 
directly or indirectly controls their terms and conditions of 
employment, H.R. 3459 would deny workers the right to bargain 
with all of the entities that have effective control, whether 
that control is exercised or reserved. It is worth noting that 
in more than a third of union organizing drives, the employer 
fires at least one worker. Given that such union avoidance 
strategies are commonplace, it is clear that workers employed 
by a subcontractor need protections from the dismissal of a 
subcontractor by the lead employer for engaging in activities 
protected under the NLRA. However, this bill undermines efforts 
to hold the lead employer accountable and could render the 
collective bargaining process futile.
    H.R. 3459 jettisons the longstanding common law used to 
define ``employer'' in an employment relationship. In the BFI 
decision, the NLRB re-instated the common law of agency to 
determine whether an entity was a joint employer. The Taft 
Harley Act of 1947 directed the NLRB to use the common law of 
agency. This same test was in place prior to 1984, and 
subcontractors and franchising entities were able to prosper 
under that traditional test for a joint employer.
    This bill will further exacerbate wage stagnation and 
income inequality, by making collective bargaining a fruitless 
exercise in the increasingly fissured workplace.

                                   Robert C. ``Bobby'' Scott,
                                           Ranking Member.
                                   Mark DeSaulnier.
                                   Joe Courtney.
                                   Mark Takano.
                                   Jared Polis.
                                   Suzanne Bonamici.
                                   Marcia L. Fudge.
                                   Raul M. Grijalva.
                                   Hakeem S. Jeffries.
                                   Mark Pocan.
                                   Gregorio Kilili Camacho Sablan.
                                   Katherine M. Clark.
                                   Frederica S. Wilson.
                                   Susan A. Davis.
                                   Alma S. Adams.
                                   Ruben Hinojosa.

                                  [all]