Washington dysfunction continues to mire resolution of “joint employer” standard

The “joint employer” relationship – the concept that two business entities share sufficient control and supervision of an employee such that they may both be considered an “employer” and are therefore subject to labor law violations – continues to be hotly contested by businesses, lobbyists, politicians and lawyers. The recent origin of this saga stems from the National Labor Relations Board’s (NLRB) Browning-Ferris Industries ruling in 2015 that said a business can be considered a joint employer of another’s workers if it exerts “indirect” or “potential” control over those workers’ terms and conditions of employment. At the time of that ruling, the NLRB consisted of a Democratic-appointed majority. When the NLRB switched over to a Republican-controlled majority after the 2016 election, it began the process of undoing the Browning-Ferris Industries through a subsequent ruling. In February 2018, however, the NLRB was forced to reinstate the Browning-Ferris standard after the NLRB’s inspector general issued a report that called for the recusal of one of the Republican-appointed NLRB members as a result of an alleged conflict of interest due to such member’s prior work at a law firm that represented Browning-Ferris. The recusal was applauded by labor unions, Democratic senators and opponents of the traditional joint-employer standard.

Such recusal tactics and allegations of ethics violations appear to now be a new battlefront in the war over the joint employer standard and the future of NLRB decision-making on the issue. Earlier this year, an administrative law judge rejected a proposed settlement agreement between the NLRB and McDonald’s Corp. that would have resolved numerous alleged unfair labor practices claimed by the Service Employee International Union (SEIU) against McDonald’s Corp. and McDonald’s franchisees as a joint employer. This stems from such franchisees’ employees’ support for the “Fight for $15” campaign for higher wages by various workers groups. The proposed settlement  is now pending before the five-member NLRB. The SEIU, Democratic senators and other activist groups have called for the recusal of two Republican-appointed members of the NLRB from the McDonald’s case because they previously worked at law firms that both had entered agreements to help McDonalds counter the campaign for unionization. The NLRB has declined to comment on the recusal request. Nevertheless, activist groups appear emboldened to use recusal claims to slow down the NLRB’s rule-making process on the joint employer standard.

All of this palace intrigue and gamesmanship could be addressed by either further NLRB rule-making, opinion letters, regulations or simply by codifying the joint employer standard into law. But that is easier said than done in this age of political discourse. Back on Nov. 7, 2017, the United States House of Representatives passed the Save Local Business Act (H.R. 3441), 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 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. 

Passage of the Save Local Business Act would swiftly resolve many of the contested matters pending before the NLRB involving the joint employer standard and provide clarity for franchisors and franchisees on the issue. Unfortunately for its supporters, the Senate has not yet taken up the House bill. Given the unknowns facing both parties in this mid-term election year, one would be wise to think no further legislation on the Save Local Business Act will proceed until the dust settles on the election results and the make-up of the next Congress is known. Until then, the political ping pong surrounding the joint employer standard at the NLRB will continue.