[House Report 118-338]
[From the U.S. Government Publishing Office]
118th Congress } { REPORT
HOUSE OF REPRESENTATIVES
1st Session } { 118-338
======================================================================
PROVIDING FOR CONGRESSIONAL DISAPPROVAL UNDER CHAPTER 8 OF TITLE 5,
UNITED STATES CODE, OF THE RULE SUBMITTED BY THE NATIONAL LABOR
RELATIONS BOARD RELATING TO ``STANDARD FOR DETERMINING JOINT EMPLOYER
STATUS''
_______
January 3, 2024.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Ms. Foxx, from the Committee on Education and the Workforce, submitted
the following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.J. Res. 98]
The Committee on Education and the Workforce, to whom was
referred the joint resolution (H.J. Res. 98) providing for
congressional disapproval under chapter 8 of title 5, United
States Code, of the rule submitted by the National Labor
Relations Board relating to ``Standard for Determining Joint
Employer Status'', having considered the same, reports
favorably thereon without amendment and recommends that the
joint resolution do pass.
PURPOSE
The purpose of H.J. Res. 98 is to disapprove of the rule
related to ``Standard for Determining Joint Employer Status''
that was first announced on September 7, 2022, and published as
a final rule in the Federal Register on October 27, 2023.
COMMITTEE ACTION
113TH CONGRESS
Second Session--Hearings
On June 24, 2014, the Subcommittee on Health, Employment,
Labor, and Pensions (HELP) held a National Labor Relations
Board (NLRB or Board) oversight hearing titled ``What Should
Workers and Employers Expect Next from the National Labor
Relations Board?'' Witnesses were Mr. Andrew F. Puzder, CEO,
CKE Restaurants Holdings, Inc., Carpinteria, CA; Mr. Seth H.
Borden, Partner, McKenna Long & Aldridge, New York, NY; Mr.
James B. Coppess, Associate General Counsel, AFL--CIO,
Washington, D.C.; and Mr. G. Roger King, Of Counsel, Jones Day,
Columbus, OH. Witnesses discussed upcoming NLRB cases and
policy and cited changes to the joint employer standard as one
of the most significant and controversial issues before the
Board at that time.
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 were Mr. Todd Duffield,
Shareholder, Ogletree, Deakins, Nash, Smoak and Stewart,
Atlanta, GA; Mr. Clint Ehlers, President, FASTSIGNS of
Lancaster and Willow Grove, Lancaster and Willow Grove, PA,
testifying on behalf of the International Franchise
Association; Mr. Harris Freeman, Professor, Western New England
University School of Law, Springfield, MAs; Ms. Catherine
Monson, Chief Executive Officer, FASTSIGNS International, Inc.,
Carrollton, TX, testifying on behalf of the International
Franchise Association; and Mrs. Jagruti Panwala, owner of
multiple hotel franchises in the northeastern United States,
Bensalem, PA. Witnesses spoke about how an expanded joint
employer standard would negatively impact franchises and other
small businesses.
114TH CONGRESS
First Session--Hearings
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, in anticipation of the NLRB creating a new joint
employer standard. Witnesses were Mr. Marcel Debruge, Burr and
Forman LLP, Birmingham, AL; Mr. Chris Holmes, CEO, CLH
Development Holdings, Tallahassee, L; and Col. Steve Carey,
USAF, Ret., Owner and Operator, CertaPro Painters of Mobile and
Baldwin Counties, Daphne, AL, testifying on behalf of the
Coalition to Save Local Businesses and the International
Franchise Association. Witnesses testified that the new joint
employer standard would threaten the independence of small
businesses and deter franchisors from licensing new
franchisees.
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 were Mr. Jeffrey M. Mintz, Shareholder, Littler
Mendelson, P.C., Atlanta, GA; Mr. Kalpesh ``Kal'' Patel,
President and COO, Image Hotels, Inc., Pooler, GA; Mr. Alex
Salguerio, Savannah Restaurants Corp., Savannah, GA; and Mr.
Fred Weir, President, Meadowbrook Restaurant Company Inc.,
Cumming, GA, testifying on behalf of the Coalition to Save
Local Businesses and the International Franchise Association.
Witnesses testified the new joint employer standard would hurt
small business growth in Georgia and create barriers to entry
for potential franchise owners.
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, MD, testifying on
behalf of himself and the National Franchisee Association; Mr.
Kevin Cole, CEO, Enniss Electric Company, Manassas, VA,
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,
CA, testifying on behalf of herself and the Coalition to Save
Local Businesses; Mr. Michael Harper, Professor, Boston
University School of Law, Boston, MA; and Dr. Anne Lofaso,
Professor, West Virginia University College of Law, Morgantown,
WV. Witnesses testified that 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.
First Session--Legislative Action
On September 9, 2015, then-Committee on Education and the
Workforce (Committee) Chairman John Kline (R-MN) introduced the
Protecting Local Business Opportunity Act (H.R. 3459, 114th
Congress). Recognizing the threat to small businesses posed by
the NLRB's August 2015 decision in Browning-Ferris Industries
of California, Inc. (Browning-Ferris),\1\ the legislation
amended 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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On October 28, 2015, the Committee considered and marked up
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
the Act. The Committee voted to adopt the amendment in the
nature of a substitute by voice vote. The Committee then
favorably reported H.R. 3459, as amended, to the House of
Representatives by a vote of 21 to 15.
115TH CONGRESS
First Session--Hearings
On February 14, 2017, the HELP Subcommittee held a hearing
titled ``Restoring Balance and Fairness to the National Labor
Relations Board.'' Witnesses decried the extreme, partisan
decisions of the NLRB during the Obama administration,
including the expanded joint employer standard. Witnesses were
Ms. Reem Aloul, BrightStar Care of Arlington, Arlington, VA,
testifying on behalf of the Coalition to Save Local Businesses;
Ms. Susan Davis, Partner, Cohen, Weiss and Simon, LLP, New
York, NY; Mr. Raymond J. LaJeunesse, Jr., Vice President,
National Right to Work Legal Defense and Education Foundation,
Springfield, VA; and, Mr. Kurt G. Larkin, Partner, Hunton &
Williams LLP, Richmond, VA.
On July 12, 2017, the Committee held a hearing titled
``Redefining Joint Employer Standards: Barriers to Job Creation
and Entrepreneurship'' to examine the impact of expanding joint
employer standards across federal labor laws, including the
NLRA and the Fair Labor Standards Act (FLSA). Witnesses were
Mr. Michael Harper, Professor, Boston University School of Law,
Boston, MA; Mr. Richard Heiser, Vice President, FedEx Ground
Package System, Inc., Chicago, IL; Mr. G. Roger King, Senior
Labor and Employment Counsel, HR Policy Association,
Washington, D.C.; Mr. Jerry Reese II, Director of Franchise
Development, Dat Dog, New Orleans, LA, testifying on behalf of
the Coalition to Save Local Businesses; Ms. Catherine K.
Ruckelhaus, General Counsel, National Employment Law Project,
New York, NY; and Ms. Mary Kennedy Thompson, Chief Operating
Officer of Franchise Brands, Dwyer Group, Waco, TX, testifying
on behalf of the International Franchise Association. Witnesses
testified about the importance of reigning in expanding joint
employer standards.
On September 13, 2017, the HELP and Workforce Protections
Subcommittees held a joint legislative hearing on H.R. 3441.
Witnesses were Mr. Zachary D. Fasman, Partner, Proskauer Rose
LLP, New York, NY; Ms. Tamara Kennedy, President, Twin Cities
T.J.'s Inc., Roseville, MN, testifying on behalf of the
Coalition to Save Local Businesses; Mr. Granger MacDonald,
Chief Executive Officer, The MacDonald Companies, Kerrville,
TX, testifying on behalf of the National Association of Home
Builders; and Mr. Michael Rubin, Partner, Altshuler Berzon LLP,
San Francisco, CA. Witnesses testified that H.R. 3441 clarifies
the joint employer standard used under both the NLRA and FLSA
and benefits workers and business owners.
First Session--Legislative Action
On July 27, 2017, then-Subcommittee on Workforce
Protections Chairman Bradley Byrne (R-AL) introduced the Save
Local Business Act (H.R. 3441, 115th Congress). In response to
expanding joint employer standards under the NLRA and FLSA, the
bill amends both laws to provide that two or more employers can
only be considered joint employers if each shares and exercises
control over essential terms and conditions of employment and
if such control over those matters is actual, direct, and
immediate.
On October 4, 2017, the Committee considered and marked up
H.R. 3441. Then-Subcommittee on Workforce Protections Chairman
Byrne offered an amendment in the nature of a substitute,
making technical changes.\2\ The Committee voted to adopt the
amendment in the nature of a substitute by voice vote. The
Committee then favorably reported H.R. 3441, as amended, to the
House of Representatives by a vote of 23 to 17. On November 7,
2017, H.R. 3441 passed the House by a vote of 242 to 181.
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\2\The amendment in the nature of a substitute clarified that a
list of terms and conditions of employment included in the act are
examples of what can be considered in a joint employer analysis, but
not a comprehensive list, and control of every term and condition is
not required for joint employment to be found.
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116TH CONGRESS
First Session--Hearings
On May 8, 2019, the HELP Subcommittee held a hearing titled
``Protecting the Right to Organize Act: Deterring Unfair Labor
Practices.'' Witnesses were Mr. Roger King, Senior Labor and
Employment Counsel, HR Policy Association, Arlington, VA; Mr.
Josue Alvarez, Truck Driver, XPO Logistics, Bell Gardens, CA;
Ms. Charlotte Garden, Associate Professor, Seattle University
School of Law, Seattle, WA; and Mr. Richard Griffin, Of
Counsel, Bredhoff and Kaiser, P.L.L.C, Washington, D.C.
Republican Members and Mr. King criticized the Protecting the
Right to Organize Act's potential harmful impact on workers and
businesses, including its expanded joint employer standard.
On July 25, 2019, the HELP Subcommittee held a hearing
titled ``Protecting the Right to Organize Act: Modernizing
America's Labor Laws.'' Witnesses were Mr. Richard Trumka,
President, AFL-CIO, Washington, D.C.; Mr. Jim Status, Former
University of Pittsburgh Medical Center Employee, Pittsburgh,
PA; Mr. Phillip Miscimarra, Senior Fellow, The Wharton School,
University of Pennsylvania, Philadelphia, PA; and Mr. Mark
Gaston, Former Chairman, NLRB, Washington, D.C. Republican
Members and Mr. Miscimarra criticized the Protecting the Right
to Organize Act's expanded joint employer standard, among other
provisions.
118TH CONGRESS
First Session--Hearings
On March 28, 2023, the Committee held a hearing titled
``Unleashing America's Opportunities for Hiring and
Employment.'' Witnesses were Chris Spear, President, American
Trucking Association, Washington, D.C.; Mr. Jerry Akers,
Franchisee/Owner, Sharpness, Inc. DBA Great Clips and the Joint
Chiropractic, Palo, IA; Dr. Heidi Shirholz, President, Economic
Policy Institute, Washington, D.C.; and Mr. Stephen Moore,
Senior Fellow in Economics, Heritage Foundation, Washington,
D.C. Witnesses discussed how Biden administration policies,
including the NLRB's joint employer proposed rule, were making
it harder to create jobs and overcome inflation.
First Session--Legislative Action
On November 9, 2023, Representative John James (R-MI)
introduced H.J. Res 98, Providing for congressional disapproval
under chapter 8 of title 5, United States Code, of the rule
submitted by the National Labor Relations Board relating to
``Standard for Determining Joint Employer Status'' with
Chairwoman Virginia Foxx (R-NC) and Representatives Mike
Johnson (R-LA), Jim Banks (R-IN), Aaron Bean (R-FL), Earl L.
``Buddy'' Carter (R-GA), Tom Cole (R-OK), James Comer (R-KY),
Eric A. ``Rick'' Crawford (R-AR), Jeff Duncan (R-SC), Scott
Fitzgerald (R-WI), Bob Good (R-VA), Lance Gooden (R-TX), Diana
Harshbarger (R-TN), Clay Higgins (R-LA), Ashley Hinson (R-IA),
Erin Houchin (R-IN), Jake LaTurner (R-OK), Julia Letlow (R-LA),
Lisa McClain (R-MI), John R. Moolenaar (R-MI), Alexander X.
Mooney (R-WV), Greg Pence (R-IN), John W. Rose (R-TN), Adrian
Smith (R-NE), Michelle Steel (R-CA), Glenn Thompson (R-PA), Tim
Walberg (R-MI), Elise Stefanik (R-NY), and David G. Valadao (R-
CA). The resolution was referred to the Committee on Education
and the Workforce.
On December 12, 2023, the Committee considered H.J. Res. 98
in legislative session and reported it favorably to the House
of Representatives by a recorded vote of 25-20.
COMMITTEE VIEWS
INTRODUCTION
Small businesses are still recovering from the pandemic,
and owners are not optimistic about the current economic
environment.\3\ Survey after survey finds inflation is the top
challenge for small businesses.\4\ ``Bidenomics'' and the
current administration's policies have led to skyrocketing
inflation and high prices for American households and
employers. Consumer sentiment is equally pessimistic, falling
for the fourth straight month, according to the University of
Michigan Survey of Consumers.\5\
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\3\https://www.nfib.com/content/press-release/economy/nfib-
celebrates-50-years-of-small-business-economic-data-with-october-
survey/.
\4\https://www.uschamber.com/sbindex/quarterly-spotlight.
\5\http://www.sca.isr.umich.edu/.
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Instead of changing course in light of economic conditions,
the Biden administration has continued to issue costly
regulations that harm workers, small businesses, and consumers.
In total, the Biden administration has finalized 724
regulations, costing $434.8 billion and imposing 223,725,800
paperwork burden hours on the public.\6\ Such rapid
accumulation of rules slows economic growth\7\ while imposing
more significant costs on small businesses.\8\ The NLRB's
``Standard for Determining Joint Employer Status''
significantly adds to existing regulatory burdens and will
cause devastating economic consequences for small businesses,
workers, consumers, and the economy.\9\
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\6\https://www.regrodeo.com/
?year%5B0%5D=2023&year%5B1%5D=2022&year%5B2%5D=2021.
\7\https://www.mercatus.org/research/policy-briefs/regulatory-
accumulation
-and-its-costs#::text=By%20distorting%20the%20investment%
20choices,rate%20of%20the%20US%20GDP.
\8\https://ldr.lafayette.edu/concern/publications/6q182k69n.
\9\Standard for Determining Joint-Employer Status, 88 Fed. Reg.
53,946 (Oct. 27, 2023).
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Background on joint employer status under the National Labor Relations
Act
Predictability and transparency are crucial to upholding
the rule of law. Regulated parties deserve clear rules and
standards that make it obvious what is proscribed or permitted
by law. Without a clear understanding of the rules, it is
extremely difficult for the regulated community to plan for the
future or know how to act in order to comply with the rules.
H.J. Res. 98 will bring the necessary certainty to the joint
employer standard under the National Labor Relations Act
(NLRA).
From 1984 to August 2015, the NLRB's joint employer
standard provided such certainty and clarity. It examined
whether two or more employers shared control over or co-
determined the essential terms and conditions of employment to
determine whether two separate entities should be considered
``joint employers'' under the NLRA.\10\ Essential terms and
conditions of employment included hiring, firing, discipline,
supervision, and direction of employees. Under this standard,
the joint employers' control over these employment matters must
have been actual, direct, and immediate.\11\ This predictable
and clear standard ensured employers would not be saddled with
collective bargaining obligations or with liability of a
company they do not control.
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\10\TLI, Inc., 271 NLRB 798 (1984), overruled by Browning-Ferris
Indus. of Calif., Inc., 362 NLRB No. 186 (2015).
\11\See Airborne Express, 338 NLRB 597, 597 n.1 (2002) (``[The]
essential element in [joint employer] analysis is whether a putative
joint employer's control over employment matters is direct and
immediate.''); 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.'').
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In 2015, the Obama NLRB issued a decision in Browning-
Ferris Industries of California (Browning-Ferris) that upended
decades of Board precedent by dramatically expanding the
definition of joint employer under the NLRA.\12\ Under this
standard, two entities were deemed joint employers based on the
mere existence of reserved control, indirect control, or
control that was limited and routine. As a result, Browning-
Ferris greatly increased the universe of potential joint
employers.
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\12\Browning-Ferris Industries of California, Inc., 362 NLRB No.
186 (2015).
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In 2018, the U.S. Court of Appeals for the District of
Columbia Circuit upheld portions of Browning-Ferris.\13\ While
the D.C. Circuit ruled that evidence of reserved or indirect
control could be appropriate factors in determining joint
employer status, the court also ruled that the Board applied
the concept of ``indirect control'' too broadly.\14\ The D.C.
Circuit returned the case to the Board, directing that it
reevaluate the case by considering ``indirect control'' of only
those factors directly related to the terms and conditions of
employment of the relevant employees.\15\ The court noted that
by ``failing to distinguish evidence of indirect control that
bears on workers'' essential terms and conditions from evidence
that simply documents the routine parameters of company-to-
company contracting,'' the Board had exceeded its authority and
``overshot the common-law mark.''\16\ Moreover, the court held,
```global oversight' is a routine feature of independent
contracts'' which should not be a factor relevant to the
analysis of a joint-employment relationship.\17\
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\13\Browning-Ferris Indus. of Calif., Inc. v. NLRB, 911 F.3d 1195
(D.C. Cir. 2018).
\14\Id. at 1216.
\15\Id. at 1223-1224.
\16\Id. at 1216.
\17\Id. at 1220.
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On February 25, 2020, the Trump NLRB issued a final rule
restoring the traditional joint employer standard, where joint
employer status is found only when a company exercises
``substantial direct and immediate control'' over the essential
terms and conditions of another company's employees.\18\ On
October 27, 2023, the Biden NLRB issued a final rule
establishing a new standard for determining joint-employer
status under the NLRA,\19\ largely reviving the Obama NLRB's
joint employer standard from the 2015 decision in the Browning-
Ferris case.\20\ The rule rescinds and replaces the Trump
NLRB's joint employer final rule.
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\18\Joint Employer Status Under the National Labor Relations Act,
85 Fed. Reg. 11,184 (Feb. 26, 2020).
\19\Standard for Determining Joint-Employer Status, 88 Fed. Reg.
53,946 (Oct. 27, 2023).
\20\Browning-Ferris Industries of California, Inc., 362 NLRB No.
186 (2015).
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Under the new rule, a joint employer relationship is
established when employers share and codetermine, whether
directly or indirectly, employees' essential terms and
conditions of employment. The Board may also determine that
joint employer status exists when two or more employers
exercise or possess the power to control, whether directly or
indirectly, employees' essential terms and conditions of
employment. Under this standard, what is considered an
essential term and condition of employment is greatly expanded.
CONSEQUENCES OF AN EXPANDED AND VAGUE JOINT EMPLOYER STANDARD
The damaging consequences of the Biden NLRB's joint
employer standard are well understood because it largely
revives the Obama NLRB's Browning-Ferris decision. The Board's
new joint employer rule is similarly broad and vague like the
Browning-Ferris standard that created immense uncertainty and
imposed massive costs on thousands of businesses nationwide.
A report published in 2016 by the franchising industry
consultancy FranData when the Browing-Ferris decision was in
effect found that ``40,000 businesses operating in 75,000
franchise locations are at risk of failure because of the NLRB
ruling and its resulting egregiously high labor and operating
costs.''\21\ In addition, the increased risk of business
failures and potential decline in the formation of new
franchise businesses could mean that ``600,000 jobs may be lost
or not created.''
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\21\Frandata Key Findings and Survey Results: 2015 National Labor
Relations Board-Joint Employer Ruling (Feb. 10, 2016), https://
www.frandata.com/wp- content/uploads/2016/03/
FRANdata_Joint_Employer_Impact_Study.pdf.
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Another economic analysis of the Browning-Ferris decision
found that it significantly harmed both franchisors and
franchisees, stifling the creation of business ownership.
According to the study, the Browning-Ferris decision cost the
``franchising sector as much as $33.3 billion annually and has
resulted in as many as 376,000 lost job opportunities.''\22\
The losses for small franchisees were significant, with the
average franchisee experiencing an annual revenue loss of
$142,000 per year.\23\ Furthermore, the Browning-Ferris joint
employer standard led to a 93 percent increase in NLRB unfair
labor practice charges and petitions alleging joint employment
in the franchise sector, significantly increasing litigation
costs for businesses that contract with other companies.\24\
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\22\Ronald Bird, Statement Regarding the Economic Impact of the
Prospective NLRB Public Policy Decision Regarding the Definition of
Joint Employer 2 (Jan. 28, 2019), https://www.franchise.org/sites/
default/files/2019-05/JE%20Econ%20Impact%200128.pdf.
\23\Id.
\24\Id.
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Franchisors and franchisee independent local businesses
have expressed concerns that harm done by a joint employer
standard, including indirect and reserved control, will block
entrepreneurs from starting new businesses. In a hearing on
joint employment during the 115th Congress, Tamara Kennedy,
President of Twin City T.J.'s, Inc., explained how important
the franchise business model was in her road to business
ownership and how unlimited joint employment liability could
have stifled her aspirations:
I am very involved in protecting our life's work and
ensuring that this [franchise] industry, that has
provided so much to me, can continue to do the same for
every rising entrepreneur. . . . Countless people in
the franchise industry start out in administrative
roles like mine--or as busboys, line cooks or
cashiers--and move up to become multi-unit owners.
Stories like ours are celebrated as some of the
greatest American success stories there are, and the
franchise structure is, in large part, responsible. It
has provided each of us with so many opportunities to
succeed, and I am hopeful that it will remain intact so
that it can continue to afford other hard-working
employees similar paths to success. . . . After two
years operating under the expanded joint employer
standard, the impact on my business is clear: joint
employer means I must pay more to run my business, and
earn less in return, all while worrying if the unclear
joint employment liability rules will continue to erode
my autonomy to run my business.\25\
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\25\The Save Local Business Act: Hearing on H.R. 3441, Save Local
Business Act, Before the Subcomm. on Health, Emp't, Lab. & Pensions &
the Subcomm. on Workforce Protections of the H. Comm. on Educ. & the
Workforce, 115th Cong. 25-26 (2017) (statement of Tamra Kennedy,
President, Twin City T.J.'s, Inc.).
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The broad, vague, and confusing standard in the Biden
NLRB's joint employer rule mirrors the Obama-era Browning-
Ferris standard. Jerry Reese, Director of Franchise Development
at Dat Dog Franchise, testified before the Committee how the
confusion from such unclear standards harms businesses:
The most important part of our business's success
rests in the hands of our wonderful and competent
people. They are the faces of our restaurants at each
location, and we rely on them each day. . . . [T]he
most important aspect of my position as the director of
franchise development is in training future franchise
owners, so that they can hire their own wonderful and
competent employees.
But employee training is a great example of the
confusion that lies within the very real threat to
local businesses from a joint employer standard based
on direct, indirect and reserved control. Franchise
companies naturally want to pass along their expertise
and experience to as many people as possible within
their system. But now franchise brands are limited by
only being able to train franchise employees if the
training is deemed necessary to ensuring brand
standards. While no business can afford to have a
poorly trained work force, locally owned businesses are
now faced with the question of how to train employees
in your system to uphold brand standards with the all-
too-real threat of joint employment liability looming
over all of us.
[T]hanks to the mess created by the National Labor
Relations Board, franchising is caught in an unworkable
Catch-22. On one hand, franchisors must impose a series
of operational standards upon franchisees to maintain
brand standards and consistency. But on the other hand,
these fundamental operational standards have served as
the basis for regulators to name franchisors as joint
employers of their franchisees' employees.\26\
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\26\Redefining Joint Employer Standards: Barriers to Job Creation
and Entrepreneurship: Hearing Before the H. Comm. on Educ. & the
Workforce, 115th Cong. (2017) (statement of Jerry Reese, II, Dir. of
Franchise Development, Dat Dogs Franchise, LLC, at 4-5), https://
edworkforce.house.gov/uploadedfiles/reese_-_testimony.pdf.
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Mary Kennedy Thompson of Dwyer Group service brands
testified before the Committee about the widespread
consequences of an expanded joint employer standard:
Franchises are not the only business model threatened
by the new standards. Research from the American Action
Forum in April 2017 projected that the new joint
employer standard could result in 1.7 million fewer
jobs in the entire private sector and 500,000 fewer
jobs in the leisure and hospitality industry alone. It
is imperative that the locally-owned businesses created
by the franchise system remain open and continue to
operate with the full support of their brand. The
system gives entrepreneurs a leg up because they can
rely on the proven-to-work tools that we as franchisors
give them, and that system is currently in
jeopardy.\27\
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\27\Redefining Joint Employer Standards: Barriers to Job Creation
and Entrepreneurship: Hearing before the House Comm. on Educ. & the
Workforce, 115th Cong. (2017) (statement of Mary Kennedy Thompson,
Chief Operating Officer of Franchise Brands, Dwyer Group, at 5),
https://edworkforce.house.gov/uploadedfiles/thompson_-_testimony.pdf.
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Further, in a full Committee hearing this Congress, Jerry
Akers, a Great Clips franchisee, described the disastrous
outcomes for the franchise business model if the Protecting the
Right to Organize Act (PRO Act) is enacted--legislation that
would codify an expansive joint employer standard which mirrors
the Biden NLRB's rule:
This puts franchisors at risk of being sued for
things they never did and had no power to stop.
Moreover, it risks wiping away the equity that I have
spent my life and career building in my businesses and
ultimately makes me a middle manager of my brand. . . .
My deep concern about the proposed PRO Act and its
consequences cannot be overstated. The legislation
threatens to undermine the very foundation upon which
franchise businesses are built, potentially devastating
the livelihoods of thousands of franchisees, and
jeopardizing the future of our workforce. For
franchisees like myself, the impact could be
catastrophic, not only affecting our businesses but
also the communities we serve and the employees who
depend on us for their livelihoods.\28\
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\28\Unleashing America's Opportunities for Hiring and Employment:
Hearing Before the H. Comm. on Educ. & the Workforce, 118th Cong. 37-39
(2023) (statement of Jerry Akers, Franchisee/Owner, Sharpness, Inc. DBA
Great Clips & the Joint Chiropractic).
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Deficient cost analysis
During the Biden administration, the Small Business
Administration's (SBA) Office of Advocacy found significant
noncompliance with the Regulatory Flexibility Act (RFA), which
requires federal agencies to examine and consider the effects
of their regulations on small businesses. Under the RFA, when
an agency publishes a Notice of Proposed Rulemaking (NPRM), it
must also publish an initial regulatory flexibility analysis
(IRFA). Furthermore, an agency must also publish a final
regulatory flexibility analysis (FRFA) when the rule is final.
An agency can avoid conducting an IRFA or FRFA when the agency
head certifies that the rule does not ``have a significant
economic impact on a substantial number of small
entities.''\29\
---------------------------------------------------------------------------
\29\5 U.S.C. Sec. 605(b).
---------------------------------------------------------------------------
Like many federal agencies during the Biden administration,
the NLRB ignored small businesses' needs in its joint employer
rulemaking, both in its proposed and final joint employer rule.
On November 29, 2022, the SBA Office of Advocacy submitted
public comments on the NLRB's joint employer proposed rule.\30\
The letter expressed a number of concerns with the proposed
rule, including that the new ``joint employer standard is too
ambiguous and broad, providing no guidance for contracting
parties on how to comply or avoid liability.''
---------------------------------------------------------------------------
\30\https://advocacy.sba.gov/wp-content/uploads/2022/11/Comment-
Letter-NLRB Joint-Employer-Rule-508c.pdf.
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Furthermore, the SBA Office of Advocacy encouraged the
Board to reassess the compliance costs of the regulation and
consider alternatives that would minimize the economic impacts
to small entities as required by the RFA because the Board
severely underestimated the costs and burden of the rule for
small businesses. The SBA Office of Advocacy noted that in the
IRFA ``the [B]oard only estimates one hour of time for a small
employer to read and understand the rule, at a cost of under
$150 per small business.''\31\ The Board also acknowledges that
companies may choose to alter their business relationships as a
result of the rule but fails to estimate such compliance costs.
The SBA Office of Advocacy further noted in its comment letter
that franchisees, restaurant owners, a general contractor, and
a construction industry representative expressed concerns that
the rule would increase compliance and litigation costs, cause
large businesses to not contract with small businesses, and
require employers to hire dedicated staff to comply with the
rule.\32\
---------------------------------------------------------------------------
\31\Id. at 5.
\32\Id.
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Rather than reassess the costs to small businesses or
incorporate their concerns, the Board majority erroneously
asserted that its joint employer final rule will not have a
significant economic impact on a substantial number of
entities.\33\ According to the final rule, the ``only direct
compliance cost for any of the 6.1 million American business
firms (both large and small) with employees is reading and
becoming familiar with the text of the new rule''\34\ with only
$227.98 in familiarization costs to small employers.\35\
---------------------------------------------------------------------------
\33\See Standard for Determining Joint Employer Status, 88 Fed.
Reg. 73,946, 74,006 (dissenting view of Member Kaplan).
\34\Id. at 74,009.
\35\Id. at 74,016.
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However, Board Member Marvin Kaplan, writing in dissent to
the new joint employer rule, stated the following:
As the public comments make clear, the majority
grossly underestimates the actual costs that small
businesses will incur to familiarize themselves with
the final rule. It is not clear how a human resources
specialist will be able to read the rule, which is
nearly 63,000 words in length, in an hour, let alone
comprehend the full ramifications of its changed legal
standard in this complicated area of the law.\36\
---------------------------------------------------------------------------
\36\Id. at 74,006 (dissenting view of Member Kaplan).
---------------------------------------------------------------------------
Certain direct compliance costs to small businesses were
deemed irrelevant by the Board majority for the purposes of the
FRFA, such as that many small businesses will be transformed
into joint employers as a result of the rule, with new
collective bargaining obligations. Member Kaplan argued this
would impose direct costs in two ways:
First, to determine whether they would be subject to
that duty, small businesses will have to review their
existing business contracts and practices to determine
whether they possess any reserved authority to control
or exercise any indirect control over any essential
term and condition of employment of another business's
employees, neither of which could alone establish joint
employer status under the 2020 Rule but either of which
will make an entity a joint employer of another
business's employees under the majority's final rule.
Second, small businesses whose joint- employer status
has been changed by the final rule and that contract
with an employer whose employees are unionized will be
required to participate in collective bargaining.\37\
---------------------------------------------------------------------------
\37\Id.
---------------------------------------------------------------------------
The Board's refusal to acknowledge the real, substantial
costs of its joint employer rule flouts legal requirements
regarding cost estimates and is a disservice to the small
businesses who will have to comply with it.
CONCLUSION
The consequences of the NLRB's vague and broad joint
employer rule cannot be overstated. Far from clarifying
employer responsibilities under the NLRA, it creates a
confusing joint employer standard that will force companies to
alter contractual relationships while imposing excessive costs
and burdens on both large and small businesses. As a result, it
will harm entrepreneurs and job creation without any
perceivable benefit to workers, employers, or consumers.
SUMMARY
H.J. RES. 98 SECTION-BY-SECTION SUMMARY
H.J. Resolution 98 resolves that Congress disapproves of
the rule related to ``Standard for Determining Joint Employer
Status,'' which was first announced on September 7, 2022, and
published as a final rule in the Federal Register on October
27, 2023.
EXPLANATION OF AMENDMENTS
No amendments to the resolution were adopted.
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.J. Res. 98 provides for congressional disapproval
under chapter 8 of title 5, United States Code, of the rule
submitted by the National Labor Relations Board relating to
``Standard for Determining Joint Employer Status'' and
therefore would ensure the standard is not applied for the
legislative branch in a manner similar to other employers.
UNFUNDED MANDATE STATEMENT
Pursuant to Section 423 of the Congressional Budget and
Impoundment Control Act of 1974, Pub. L. No. 93-344 (as amended
by Section 101(a)(2) of the Unfunded Mandates Reform Act of
1995, Pub. L. No. 104-4), the Committee traditionally adopts as
its own the cost estimate prepared by the Director of the
Congressional Budget Office (CBO) pursuant to section 402 of
the Congressional Budget and Impoundment Control Act of 1974.
The Committee reports that because this cost estimate was not
timely submitted to the Committee before the filing of this
report, the Committee is not in a position to make a cost
estimate for H.J. Res. 98.
EARMARK STATEMENT
H.J. Res. 98 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.J. Res. 98, is to provide for congressional
disapproval under chapter 8 of title 5, United States Code, of
the rule submitted by the National Labor Relations Board
relating to ``Standard for Determining Joint Employer Status.''
DUPLICATION OF FEDERAL PROGRAMS
No provision of H.J. Res. 98 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.
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.
REQUIRED COMMITTEE HEARING
In compliance with clause 3(c)(6) of rule XIII the
following hearing held during the 118th Congress was used to
develop or consider H.J. Res. 98: On March 28, 2023, the
Committee on Education and the Workforce held a hearing
entitled, ``Unleashing America's Opportunities for Hiring and
Employment.''
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 requested
but not received a cost estimate for the resolution from the
Congressional Budget Office. The Chairwoman of the Committee
shall cause such estimate to be printed in the Congressional
Record upon its receipt by the Committee.
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.J. Res. 98.
However, clause 3(d)(2)(B) of that rule provides that this
requirement does not apply when, as with the present report,
the Committee has requested a cost estimate for the bill from
the Director of the Congressional Budget Office.
CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
H.J. Res. 98, as reported by the Committee, makes no
changes in existing law.
MINORITY VIEWS
INTRODUCTION
H.J. Res. 98, Providing for congressional disapproval under
chapter 8 of title 5, United States Code, of the rule submitted
by the National Labor Relations Board relating to ``Standard
for Determining Joint Employer Status,'' would nullify the
National Labor Relations Board's (NLRB's or the Board's) final
joint employer rule ensuring that workers, who are hired
through subcontractors, temporary staffing agencies, and other
intermediaries, can hold all the entities that control their
working conditions accountable for their right to bargain
collectively for higher pay, better benefits, and safer
workplaces. If enacted, H.J. Res. 98 would reinstate the
deficient Trump-era rule that weakened workers' ability to hold
their employers accountable by narrowing the joint employer
standard to only cover entities that directly exercise control
over workers' terms and conditions of employment. H.J. Res. 98
is opposed by numerous organizations including: A Better
Balance, AFL-CIO, American Federation of State, County, and
Municipal Employees, Center for Economic and Policy Research,
Center for Law and Social Policy, Communications Workers of
America, Demos, Economic Policy Institute, International
Brotherhood of Teamsters, Jobs With Justice, National Center
for Law and Economic Justice, National Domestic Workers
Alliance, National Education Association, National Employment
Law Project, National Organization for Women, National
Partnership for Women and Families, National Women's Law
Center, Restaurant Opportunities Centers United, Leadership
Conference on Civil and Human Rights, Legal Aid Society,
Transport Workers Union of America, United Auto Workers, United
Brotherhood of Carpenters and Joiners of America, United Food
and Commercial Workers International Union, and Young
Invincibles.
HISTORY OF JOINT EMPLOYMENT & THE NATIONAL LABOR RELATIONS ACT
For most of the time since the 1935 enactment of the
National Labor Relations Act (NLRA),\1\ the NLRB has held that
an entity may be liable to bargain with the employees of a
contractor as a joint employer even if its control over terms
and conditions of employment was indirect, such as exercised
through an intermediary, or reserved but not yet exercised.\2\
This traditional standard is consistent with the U.S. Supreme
Court's requirement that the NLRB interpret the NLRA's
definition of employer as consistent with the common law\3\ as
well as with the legislative history of the NLRA's 1947
amendments.\4\
---------------------------------------------------------------------------
\1\29 U.S.C. Sec. Sec. 151-169.
\2\See, e.g., Greyhound Corp., 153 NLRB 1488, 1495 (1965) (the
first case in which the Board examined the right to control employees'
work and their terms and conditions of employment as determinative in
analyzing whether entities were joint employers of particular
employees); TLI, Inc., 271 NLRB 798 (1984) (finding that two separate
entities are joint employers of a single work force if the evidence
shows that they ``share or codetermine those matters governing the
essential terms and conditions of employment''); Floyd Epperson, 202
NLRB 23, 23 (1973) (finding joint employer status where client employer
had ``some indirect control over [employees'] wages'' and ``some
control, albeit indirect, over [employee] discipline''), enforced 491
F.2d 1390 (6th Cir. 1974); Franklin Stores Corp., 199 NLRB 52, 53
(1972) (finding joint employment where one employer, ``by virtue of the
lease arrangement with'' the other employer, ``has the right to veto
the employment of employees by'' the other ``and to insist on the
discharge of employees by'' the other).
\3\See NLRB v. United Ins. Co. of America, 390 U.S. 254, 256 (1968)
(requiring the Board to ``apply general agency principles in
distinguishing between employees and independent contractors under the
Act'').
\4\See House Conf. Rep. No. 510 on H.R. 3020 at 32-33 (1947)
reprinted in 1 Legislative History of the Labor Management Relations
Act, 1947, at 536-37 (1948) (explaining the exclusion of independent
contractors from the definition of employee in order to overturn a
Supreme Court decision that ``held that ordinary tests of the law of
agency could be ignored by the Board'' in determining the existence of
employment relationships).
---------------------------------------------------------------------------
Without providing any explanation, the NLRB departed from
this traditional standard in 1984, discounting indirect and
reserved control from the joint employer analysis in two
decisions.\5\ In another decision in 2002, the NLRB explicitly
limited the joint employer standard to only ``direct and
immediate'' control.\6\ In recent decades, temporary and
contingent employment arrangements proliferated rapidly, and
the NLRB's departure from the common law enabled corporations
to use intermediaries to evade any obligation to bargain
collectively with workers.\7\
---------------------------------------------------------------------------
\5\TLI, Inc., 271 NLRB 798, 803 (1984); Laerco Transportation, 269
NLRB 324, 325-26 (1984).
\6\Airborne Freight Co., 338 NLRB 597 (2002) (finding the
``essential element'' to be ``whether a putative joint employer's
control over employment matters is direct and immediate'').
\7\Testimony of Catherine K. Ruckelshaus, EDUC. & THE WRKF. COMM.
DEMS. (July 12, 2017), https://democrats-edworkforce.house.gov/
hearings/redefining-joint-employer-standards-barriers-to-job-creation-
and-entrepreneurship, at 4 (``Between 2005 and 2015, the number of
contract workers grew by more than half, while the overall workforce
grew by only five percent.'') (submitted to Redefining Joint Employer
Standards: Hearing Before the H. Comm. on Educ. & the Wrkf., 115th
Cong. (Jul. 12, 2017)).
---------------------------------------------------------------------------
In the 2015 Browning-Ferris decision, the NLRB restored
earlier precedent considering an entity's reserved and indirect
control over working conditions.\8\ The NLRB's previous
Republican majority initiated an attempt to overturn Browning-
Ferris by rulemaking.\9\ While that rulemaking was pending, the
D.C. Circuit upheld Browning-Ferris ``as fully consistent with
the common law [because] both reserved authority to control and
indirect control can be relevant factors in the joint-employer
analysis.''\10\ Specifically, the court held that consideration
of a company's right to control ``is an established aspect of
the common law of agency,'' and that Browning-Ferris was also
correct that ``an employer's indirect control over employees
can be a relevant consideration.''\11\ The D.C. Circuit also
warned that, ``[t]he Board's rulemaking . . . must color within
the common-law lines identified by the judiciary.''\12\
---------------------------------------------------------------------------
\8\362 NLRB 1599, 1600 (2015).
\9\See The Standard for Determining Joint Employer Status, 83 Fed.
Reg. 46681 (Sept. 14, 2018).
\10\Browning-Ferris Indus. of Cal. v. NLRB, 911 F.3d 1195, 1222
(D.C. Cir. 2018).
\11\Id. at 1209.
\12\Id.
---------------------------------------------------------------------------
Rather than adhering to the court's warning, in 2020, the
NLRB's Republican majority issued a final rule (2020 Rule) that
narrowed the joint employer standard to only cover entities
that ``possess and actually exercise substantial direct and
immediate control over employees'' essential terms and
conditions of employment.''\13\ To justify sidelining
consideration of indirect and reserved control, which the D.C.
Circuit emphasized, the 2020 Rule stated that indirect and
reserved control may still be considered but could not,
``without more[,] establish a joint-employer
relationship.''\14\ In a 2022 decision, the D.C. Circuit
described this claim as ``dubious,'' emphasizing that it ``took
great pains to inform the Board that the failure to consider
reserved or indirect control is inconsistent with the common
law of agency.''\15\
---------------------------------------------------------------------------
\13\The Standard for Determining Joint Employer Status, 85 Fed.
Reg. 11184, 11185 (Feb. 26, 2020) (codified at 29 C.F.R. pt. 103).
\14\Id. at 11220.
\15\Sanitary Truck Drivers & Helpers Local 350 v. NLRB, 45 F.4th
38, 47 (D.C. Cir. 2022) (considering issues in Browning-Ferris that the
Board addressed after the D.C. Circuit remanded in 2018).
---------------------------------------------------------------------------
The 2020 Rule eroded workers' rights significantly. For
example, as Committee Democrats observed, the failure to
include safety in the list of ``essential terms and conditions
of employment'' meant that ``if a hospital controls the
workplace safety standards, but refuses to bargain with the
temporary agency workers, these workers will lack recourse
against the party setting working conditions.''\16\ More
broadly, the 2020 Rule created what the AFL CIO described as
``a roadmap to retain ultimate control over key aspects of
workers'' lives--like wages and working conditions--while
avoiding their duty to bargain'':\17\
---------------------------------------------------------------------------
\16\H. COMM. ON EDUC. & LAB., CORRUPTION, CONFLICTS, AND CRISIS:
THE NLRB'S ASSAULT ON WORKERS' RIGHTS UNDER THE TRUMP ADMINISTRATION 3
(Oct. 2020), https://democrats-edworkforce.house.gov/imo/media/doc/
NLRB%20Report%20(Final).pdf.
\17\House Letter Supporting NLRB Joint-Employer Rule, AFL-CIO (Nov.
8, 2023), https://aflcio.org/about/advocacy/legislative-alerts/house-
letter-supporting-nlrb-joint-employer-rule.
---------------------------------------------------------------------------
Companies are adopting business structures
specifically designed to maintain control over the
workers who keep their businesses running while
simultaneously disclaiming any responsibility for those
workers under labor and employment laws. Such
businesses often insert second and third-level
intermediaries between themselves and their workers.
These companies seek to have it both ways--to control
the workplace like an employer but dodge the legal
responsibilities of an employer. . . .
For example, if employees of a subcontractor were to
unionize and bargain only with the subcontractor, it
might simply refuse to bargain over certain issues
because its contract with the prime contractor governs
those aspects of the work (e.g., pay, hours, safety,
etc.). This harms workers because the entity that
effectively determines workplace policy is not at the
bargaining table, placing workers' desired improvements
out of reach.\18\
---------------------------------------------------------------------------
\18\Id.
---------------------------------------------------------------------------
The radical change effected by the 2020 Rule ``made it
impossible for hundreds of thousands of workers to access the
rights guaranteed them under the NLRA to join a union and
collectively bargain.''\19\
---------------------------------------------------------------------------
\19\Celine McNicholas et al., EPI Comments on NLRB's Proposed
Rulemaking on the Standard for Determining Joint-Employer Status, ECON.
POL. INST. (Dec. 7, 2022), https://www.epi.org/publication/epi-
comments-on-nlrbs-proposed-rulemaking-on-the-standard-for-determining-
joint-employer-status/.
---------------------------------------------------------------------------
In light of these consequences of the 2020 Rule, the Biden-
era NLRB issued a notice and invitation in September 2022 to
file briefs for a proposed rule to update the standard for
determining joint employer status.\20\ The NLRB issued its new
joint employer rule in October 2023 (2023 Rule),\21\ which will
take effect on February 26, 2024.\22\
---------------------------------------------------------------------------
\20\Standard for Determining Joint-Employer Status, 87 Fed. Reg.
54641 (Sept. 7, 2022).
\21\Standard for Determining Joint Employer Status, 88 Fed. Reg.
73946 (Oct. 27, 2023) [hereinafter 2023 Rule].
\22\Id. at 74017.
---------------------------------------------------------------------------
The 2023 Rule rescinded the 2020 Rule and adopted a new
standard ``grounded in established common-law agency
principles.''\23\ Specifically, the 2023 Rule restores the
NLRB's ability to consider evidence of an employer's reserved
and/or indirect control, along with direct control, whether it
is exercised or not, if employers share or codetermine one or
more of the employees' essential terms and conditions of
employment when determining joint-employer status. Such
essential terms and conditions are defined as the following:
---------------------------------------------------------------------------
\23\Press Release, Off. of Pub. Affs. Nat'l Lab. Rel. Bd. Board
Issues Final Rule on Joint-Employer Status (Oct. 26, 2023), https://
www.nlrb.gov/news-outreach/news-story/board-issues-final-rule-on-joint-
employer-status.
---------------------------------------------------------------------------
(1) Wages, benefits, and other compensation;
(2) Hours of work and scheduling;
(3) The assignment of duties to be performed;
(4) The supervision of the performance of duties;
(5) Work rules and directions governing the manner,
means, and methods of the performance of duties and the
grounds for discipline;
(6) The tenure of employment, including hiring and
discharge; and
(7) Working conditions related to the safety and
health of employees.\24\
---------------------------------------------------------------------------
\24\2023 Rule, supra note 21, at 74017-74018.
---------------------------------------------------------------------------
The 2023 Rule aligns with the joint employer provision of
the Protecting the Right to Organize Act of 2023 (PRO Act),\25\
which would require the Board or a court of competent
jurisdiction to consider as relevant direct control, indirect
control, reserved authority to control, and control exercised
in fact.
---------------------------------------------------------------------------
\25\Protecting the Right to Organize Act of 2023, H.R. 20, 118th
Cong. (2023).
---------------------------------------------------------------------------
THE 2023 RULE AND THE ``FISSURED WORKPLACE''
Joint employment is a flashpoint because of the recent
trend toward ``fissuring,'' or the disintegration of the firm
using overlapping arrangements of contracting, subcontracting,
franchising, and temping.\26\ The trend appears to be growing,
especially in low-wage work. ``It seems to be spreading like
wildfire,'' says Nelson Lichtenstein, a Research Professor in
the Department of History at the University of California,
Santa Barbara. ``All of these companies, wherever they possibly
can, want to create a workforce that doesn't work for
them.''\27\ The most visible fissured relationship is temping:
approximately 3.1 million workers in America are employed by a
temporary staffing agency on any given day, performing work on
behalf of a client company that directs their work but does not
write their paycheck.\28\ Fissured work arrangements are
associated with increased incidence of a host of workplace
violations.\29\
---------------------------------------------------------------------------
\26\See generally David Weil, The Fissured Workplace: Why Work
Became So Bad for So Many and What Can Be Done to Improve It (2014).
\27\Dave Jamieson, Romney Campaign Boxes Itself in on Outsourcing,
Offshoring Debate, Huff. Post (June 26, 2012), https://
www.huffpost.com/entry/romney-campaign-outsourcing-
offshore_n_1627761.
\28\Employees on Nonfarm Payrolls by Industry Sector and Selected
Industry Data, Bur. of Lab. Stats., https://www.bls.gov/news.release/
empsit.t17.htm (last visited Oct. 11, 2023).
\29\Weil, supra note 26.
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The rise of the ``fissured workplace'' can weaken workers'
bargaining power. Absent an appropriate joint employment
doctrine, workers hired by an intermediary firm but laboring
for a larger, more powerful firm with actual control over their
working conditions and wages will find it difficult to bargain
meaningfully. In an age of increased workplace fissuring, it is
imperative that companies not be able to point to another
entity in order to evade bargaining and liability.
The 2023 Rule's return to the NLRB's traditional standard
is necessary to mitigate the fissuring of the workplace, which
exacerbated in the decades after the NLRB departed from
considering indirect and reserved control.\30\ If a lead
business controls any of its subsidiary's workers' terms and
conditions of employment but is not deemed a joint employer,
then those workers cannot engage in collective bargaining with
the lead business to improve their terms and conditions of
employment that are within the lead business's control.\31\
This opens workers to retaliation even when they attempt to
organize a union with the subsidiary alone.
---------------------------------------------------------------------------
\30\H. Comm. on Educ. & Lab., The Future of Work: How Congress Can
Support Workers in the Modern Economy 4-5 (2020), https://democrats-
edworkforce.house.gov/imo/media/doc/
Future%20of%20Work%20Report%20(FINAL).pdf [hereinafter The Future of
Work]; see also Ruckelshaus Testimony, supra note 7, at 4.
\31\The Future of Work, supra note 30, at 6.
---------------------------------------------------------------------------
By holding employers accountable for their bargaining
obligations when they exercise control, whether direct or
indirect, organized workers can engage in meaningful
negotiations and share in the prosperity they have helped
create. According to the Economic Policy Institute (EPI), the
Biden-era NLRB's proposed 2023 Rule is estimated to raise
workers' earnings by $1.06 billion dollars annually.\32\
Conversely, the Trump-era NLRB's 2020 Rule would transfer $1.3
billion each year from workers to their bosses.\33\
---------------------------------------------------------------------------
\32\McNicholas et al., supra note 19.
\33\Id.
---------------------------------------------------------------------------
THE 2023 RULE'S IMPACT ON SMALL BUSINESS
The 2023 Rule's potential impact on small businesses has
been thoroughly reviewed. In accordance with the Regulatory
Flexibility Act of 1980,\34\ the NLRB, prior to finalizing the
2023 Rule, conducted an Initial Regulatory Flexibility Analysis
of its impact on small businesses. The analysis concluded that
``since the only quantifiable impact that [the NLRB] ha[s]
identified is the $151.51 or $99.64 that may be incurred in
reviewing and understanding the rule, [the NLRB] do[es] not
believe, subject to comments, that the proposed rule will have
a significant economic impact on a substantial number of small
entities.''\35\
---------------------------------------------------------------------------
\34\5 U.S.C. Sec. 601 et seq.
\35\Standard for Determining Joint-Employer Status, 87 Fed. Reg.
54641, 54662 (Sept. 7, 2022).
---------------------------------------------------------------------------
To ensure input from small businesses, the NLRB provided a
briefing on the proposed rule on October 20, 2022\36\--
organized by the Small Business Administration's Office of
Advocacy (SBA OA)--and extended the public comment period on
the proposed rule from 30 days to three months. After the SBA
OA's review of the proposed rule, the NLRB incorporated its
feedback in the final rule by (1) providing ``an exhaustive
list of the seven categories of terms and conditions of
employment that will be considered essential for the joint-
employer inquiry;'' (2) clarifying that an employer must have
``exercised or unexercised authority to control, or exercise
the power to control indirectly, such as through an
intermediary, an essential term or condition of employment'';
and (3) establishing that ``evidence of an entity's control
over matters that are immaterial to the existence of an
employment relationship . . . and that do not bear on the
employee's essential terms and conditions of employment is not
relevant'' to joint-employer status.\37\
---------------------------------------------------------------------------
\36\Off. of Advocacy, Virtual Labor Roundtable--October 20, 2022,
Sm. Bus. Admin. (Oct. 17, 2022), https://advocacy.sba.gov/2022/10/17/
virtual-labor-roundtable-october-20-2022/.
\37\2023 Rule, supra note 21, at 74013.
---------------------------------------------------------------------------
THE 2023 RULE'S IMPACT ON THE FRANCHISE BUSINESS MODEL
There is no credible evidence to show that the 2023 Rule
will threaten the franchise business model. The NLRB has never
issued a final decision finding a franchisor to be a joint
employer of its franchisee's employees and there is no reason
to believe it will do so in the future if the franchisor's
control is limited to the brand and does not extend into the
franchisee's labor relations. In fact, a strong joint employer
standard protects franchisees by preventing franchisors from
dictating franchisees' employee relations while leaving
franchisees on the hook for liability. For this reason, the
American Association of Franchisees and Dealers has written
letters in support of both the PRO Act's joint employer
standard\38\ and the Biden-era NLRB's proposed joint-employer
rule.\39\
---------------------------------------------------------------------------
\38\Letter from American Association of Franchisees and Dealers to
Congress (Feb. 1, 2020), https://logon.salesnexus.com/miscref/aafd/
library/aafd%20comments%20on%20joint%20employer-final.pdf.
\39\Letter from Robert L. Purvin, Jr., et al., Am. Ass'n Franch. &
Dealers, to NLRB, AAFD Comments Regarding Proposed Joint Employer Rule
(Dec. 12, 2022), https://www.aafd.org/wp-content/uploads/2022/12/AAFD-
Comments-on-Joint-Employer-Rule-December-2022-Final.pdf.
---------------------------------------------------------------------------
CONCLUSION
When workers organize unions, the NLRA guarantees them the
right to collectively bargain for better wages and working
conditions without fear of retaliation. Where multiple entities
control workers' terms and conditions of employment, this right
is rendered futile when workers are unable to bargain with all
entities that control their wages and working conditions. The
2023 Rule is therefore necessary for holding entities
accountable even if they reserve control, or exercise control
indirectly, over employees' working conditions. Committee
Democrats strongly support the 2023 Rule.
If enacted, H.J. Res. 98 would reinstate the deficient 2020
Rule that ``offered companies a roadmap to retain ultimate
control over key aspects of workers'' lives--like wages and
working conditions--while avoiding their duty to bargain.''\40\
Additionally, if H.J. Res. 98 is enacted, the NLRB would be
prohibited from issuing a new joint employer rule that is
``substantially the same'' as the disapproved rule unless
subsequent law specifically authorizes the reissued rule.\41\
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\40\Letter from the AFL-CIO, Services Employees International Union
(SEIU), and International Brotherhood of Teamsters (IBT) letter to
Congress (Nov. 8, 2023), https://aflcio.org/sites/default/files/2023-
11/House-AFL-
CIO%2C%20SEIU%2C%20IBT%20Letter%20re%20NLRB%20Joint%20Employer%20Rule.pd
f
\41\5 U.S.C. Sec. 801(b)(2). There is ongoing commentary on what
this actually means. See Maeve P. Carey, Cong. Res. Serv., IN10996,
Reissued Labor Department Rule Tests Congressional Review Act Ban on
Promulgating ``Substantially the Same'' Rules (2019).
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For the reasons stated above, Committee Democrats
unanimously opposed H.J. Res. 98 when the Committee considered
it on December 12, 2023. We urge the House of Representatives
to do the same.
Robert C. ``Bobby'' Scott,
Ranking Member.
Joe Courtney.
Gregorio Kilili Camacho Sablan.
Suzanne Bonamici.
Mark DeSaulnier.
Donald Norcross.
Pramila Jayapal.
Jahana Hayes.
Jamaal Bowman.
[all]