Regulation Rollback: NLRB’s Joint Employer Rule

Nov 6, 2017 by Paige Terryberry
A classic example of the government harming those they set out to help can be found in the joint employer rule. The Obama-era rule was intended to keep employers from dodging wage and hour laws. Instead, it ends up creating massive compliance issues and expensive regulations while threatening to upend the franchise business model.
Under the rule, parent companies could be held responsible for the labor violations of their contractors and franchises. “Franchise brands would face liability for actions they have no power to detect or prevent,” according to James Sherk, a labor expert and previous research fellow at the Heritage Foundation. The Washington Legal Foundation argued that theNational Labor Relations Board’s (NLRB) joint employer ruling of 2015 and 2016 “is so vague that regulated entities cannot confidently predict whether the new standard will result in the doctrine being applied to their future operations.” It created an unnecessary burden on parent companies that operated a franchise model, threatening the businesses and jobs that rely on that system.
Fortunately, current Secretary of Labor Alexander Acosta announced the withdrawal of the joint employer rule in June of this year. This indicates a shift in priorities at the federal level. That withdrawal, however, “does not change the legal responsibilities of employers under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act.”
Individual states may continue to push for a broad and vague definition of “joint employer”. The California Labor Commission, for example, claims that there are too many cases of people using a narrow definition of “joint employer” to avoid wage and hour laws. The Labor Commissioner began the “Wage Theft is Crime” campaign to raise public awareness.
However, these individuals are already protected under labor laws. The joint employer rule rollback would bring an overall decrease in compliance costs as well as freedom to businesses, while workers remain protected from workplace violations by franchise owners.
In July, Representative Bradley Byrne (R-AL) introduced legislation to establish a clearer, narrower, joint employer definition. According to the bill, a person may be considered a joint employer 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 (including 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).”
This legislation advanced in the House on October 4th. The House Education and the Workforce Committee voted to send the Save Local Business Act bill to the floor. Americans for Prosperity supports this legislation that would establish a more reasonable “direct and immediate” responsibility standard.
This legislation would codify the action taken earlier this year by Secretary Acosta, repealing the harmful Obama-era rule that allows a murky definition to discourage companies from franchising. This would allow business owners to focus their time running the company and creating jobs—not worrying about navigating ever-changing, burdensome compliance hurdles.