[House Report 114-355]
[From the U.S. Government Publishing Office]
114th Congress } { Report
} HOUSE OF REPRESENTATIVES {
1st Session 114-355
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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.
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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\
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\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
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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\
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\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\
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\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\
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\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.
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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\
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\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\
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\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]