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Members of the United States House of Representatives introduced the Save Local Business Act (H.R. 3441) in July 2017, with the purpose of to amending Section 2(2) of the National Labor Relations Act (29 U.S.C. 152(2)) and Section 3(d) of the Fair Labor Standards Act (29 U.S.C. 203(d)). The bill, co-sponsored by Republicans and Democrats, is a proposal to combat the National Labor Relations Board’s 2015 joint employer ruling that expanded potential liability to companies and franchisors for labor law violations committed by their subcontractors or franchisees.

What is the Save Local Business Act?

The Save Local Business Act provides that a person may be considered a joint employer in relation to an employee only if such person directly, actually, and immediately, and not in a limited and routine manner, exercises significant control over the essential terms and conditions of employment. This includes hiring employees, discharging employees, determining individual employee rates of pay and benefits, day-to-day supervision of employees, assigning individual work schedules, positions, and tasks, and administering employee discipline). 

On Nov. 7, 2017, the House passed the Save Local Business Act by a 242-181 vote. Supporters of the bill, including the franchisee industry, believe it to be an opportunity for the government to take proactive steps to protect small businesses from job-killing regulations. Opponents of the bill argued that the legislation establishes a narrow definition of joint-employer that effectively eliminates accountability for some of the entities calling the shots. Others say the bill takes away workers’ rights, effectively making it impossible for them to collectively bargain or litigate workplace disputes. It is unclear when the Senate will take up action on the bill.

Latest action from the NLRB

For its part, however, the National Labor Relations Board has recently joined in the rolling back of its previous more stringent joint-employer ruling. On Dec. 14, 2017, National Labor Relations Board (NLRB) overruled the 2015 joint-employer ruling in a 3-2 decision. In making the decision, the NLRB stated that “In all future and pending cases, two or more entities will be deemed joint employers under the National Labor Relations Act (NLRA) if there is proof that one entity has exercised control over essential employment terms of another entity’s employees (rather than merely having reserved the right to exercise control) and has done so directly and immediately (rather than indirectly) in a manner that is not limited and routine.”

As the legislative environment in Washington continues to evolve, the bill will need further bipartisan support to pass in the Senate. But perhaps the momentum created by the recent NLRB ruling may be a positive sign about the future of the Save Local Business Act.