House Panel Considers NLRA Joint Employer Bill

Daily Labor Report® is the objective resource the nation’s foremost labor and employment professionals read and rely on, providing reliable, analytical coverage of top labor and employment...

By Lawrence E. Dubé

Sept. 29 — The National Labor Relations Board's recent decision on joint employer status has left franchisees and other business owners anxious and uncertain about their rights and obligations under federal labor law, several witnesses told a House Education and the Workforce subcommittee Sept. 29.

The Health, Employment, Labor and Pensions subcommittee held a legislative hearing to consider the Protecting Local Business Opportunity Act (H.R. 3459), which would amend the National Labor Relations Act to limit joint employer findings to situations where two or more entities share control over employees that is “actual, direct, and immediate.”

The business witnesses and a management labor lawyer endorsed the proposal, which was introduced in the House by Education and the Workforce Committee Chairman John Kline (R-Minn.) and in the Senate by Health, Education, Labor and Pensions Committee Chairman Lamar Alexander (R-Tenn.).

However, two law professors told the subcommittee that the NLRB's decision in Browning-Ferris Industries of California, Inc. has been misunderstood or exaggerated, and they argued against passage of the proposed legislation.

Browning-Ferris Decision

On Aug. 27, the NLRB held 3-2 in Browning-Ferris that a company can be the joint employer of workers provided by another organization if the two firms share or codetermine matters governing the essential terms and conditions of employment of the employees in question (362 N.L.R.B. No. 186, 204 LRRM 1154 (2015)).

The NLRB majority said: “The Board may find that two or more entities are joint employers of a single work force if they are both employers within the meaning of the common law, and if they share or codetermine those matters governing the essential terms and conditions of employment.”

The board said direct, indirect and potential control over working conditions are all relevant to determining joint employer status.

Bill Intended to ‘Roll Back' NLRB

Subcommittee Chairman Phil Roe (R-Tenn.) said the board's decision “blurred the lines of responsibility for decisions affecting the daily operations of countless small businesses, including the nation's 780,000 franchise businesses and countless contractors, subcontractors, independent subsidiaries, and more.”

Calling H.R. 3459 “common sense legislation,” Roe said the bill would “roll back the NLRB's harmful decision” by requiring a showing that alleged joint employers have actual, direct and immediate control over employment conditions.

Rep. Jared Polis (D-Colo.), ranking Democrat on the panel, argued the board should be allowed to pursue the issue through its normal processes without intervention by Congress.

Witnesses See Threat to Franchising

Although the board majority in Browning-Ferris insisted it was not deciding a case involving a franchise relationship, two franchisees told the subcommittee they are very concerned about the decision's implications.

Mara Fortin, who owns six franchised Nothing Bundt Cakes stores in San Diego, said franchisees had been concerned about NLRB action that she described as “looming” for a year. When the Browning-Ferris decision finally issued, she said, it was “worse than many even expected.”

Fortin said she “signed up to run my own business,” but she is now concerned that if her franchiser may be held liable for actions in her stores, it may press for more control, at the cost of her independence.

Ed Braddy, a Burger King restaurant franchisee in Baltimore, operates a single store. He told the panel he worries that the franchiser may hesitate to renew franchise agreements for small operations like his, or may feel compelled to exercise control over his operations, leaving him as “no more than a glorified manager in my own restaurant.”

Kevin R. Cole, chief executive officer of Ennis Electric Co. in Manassas, Va., appearing on behalf of the Independent Electrical Contractors, expressed concern that after Browning-Ferris “almost any contractual relationship we enter into may trigger a finding of joint employer status that would make us liable for the employment and labor actions of our subcontractors, vendors, suppliers and staffing firms.”

“[M]ore than anything, what business owners want from an agency is clarity,” but Browning-Ferris promises to require case-by-case determinations that will leave employers uncertain about their rights and liabilities, Cole said. “The NLRB had something clear and took it away,” he said.

Management Lawyer Calls Concerns Well-Founded

Charles I. Cohen, senior counsel at Morgan, Lewis & Bockius LLP, said employers have good cause to be concerned about a board decision he called “ground-breaking.”

Cohen, a former NLRB member, said the board's new joint employer standard is ambiguous, making it “ripe for potential abuse and mischief.”

The management lawyer warned that when the board applies the test in future cases, it will “rely on the thinnest of anecdotal evidence” to justify findings of joint employer status.

Kline asked Cohen to respond to the argument that Browning-Ferris merely returned the board to a position it held before changing its stance in several 1984 decisions.

Cohen responded that the pre-1984 decisions were reached in cases where there was evidence of actual control supporting a joint employer finding. He said the earlier cases did not support the board's recent action.

Law Professor Decries Alarm Over ‘Very Narrow' Ruling

However, Michael C. Harper, a professor at Boston University School of Law, said Browning-Ferris was a “very narrow” decision that has been “greatly exaggerated.”

Harper said he has been “saddened” by the uproar over the decision, which he insisted “does not mean any contractual relationship between companies may trigger a joint employer relationship.”

The law professor said the board decision is consistent with the NLRA and consistent with the board's pre-1984 interpretation of the act. In adopting the Labor-Management Relations Act in 1947, Harper said, Congress instructed the board to follow common law agency principles.

Under Browning-Ferris, the agency must find that an organization is a common law employer before concluding it is a joint employer. Calling the new test one that is properly “tethered by” the common law, Harper said some of the alarm about the ruling may be attributed to lobbyists and lawyers who have overstated the effects of the decision.

Status of Franchising Called Open Issue

Anne Marie Lofaso, a professor at West Virginia University College of Law, said the board's recent decision was not a “radical departure” from longstanding legal principles, and she noted it did not address or resolve the concerns of franchisers or franchisees about their potential status as joint employers under the NLRA.

Lofaso and Harper noted the NLRB has not yet heard a much-publicized case concerning allegations that McDonalds USA LLC is a joint employer with restaurant franchisees. NLRB's Division of Advice decided several months ago that restaurant franchiser Freshii Development LLC was not a joint employer with a local franchisee, Nutritionality Inc., in the absence of evidence that the franchisee “shares or codetermines with Freshii matters governing the essential terms and conditions of employment of Nutritionality's employees” (Nutritionality, Inc., NLRB Div. of Advice, No. 13-CA-134294, 4/28/15 [released 5/11/15]).

Arguing that legislation to address the status of franchisers and franchisees under the NLRA would be premature, Lofaso said “the BFI case is not a franchise case so there is no effect at this time” on franchised operations.

The Senate Health, Education, Labor and Pensions Committee has scheduled a hearing on the Protecting Local Business Opportunity Act (S. 2015) on Oct. 6.

To contact the reporter on this story: Lawrence E. Dubé in Washington at ldube@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com

Text of H.R. 3459 is available at http://src.bna.com/qb.