The Save Local Business Act Could Narrow Definition of "Joint Employer"
- On July 27, 2017, legislators introduced into Congress the “Save Local Business Act” to amend the National Labor Relations Act and the Fair Labor Standards Act.
- The Act would amend the two federal statutes to require that two or more employers must have “actual, direct, and immediate” control over an employee to be considered a joint employer of such employee.
- Franchisors would be one of the primary beneficiaries of this legislation, which could reduce the risk of potential legal claims under the two statutes.
On July 27, 2017, four House Republicans and one Democrat introduced the Save Local Business Act (H.R. 3441). The bill would amend the National Labor Relations Act (NLRA), which protects the rights of employees and employers, including prohibiting employers from interfering with employees’ right to unionize and collectively bargain. The bill will would also amend the Fair Labor Standards Act (FLSA), the federal wage and hour law which provides provisions for minimum wage, overtime, child labor, and recordkeeping. If signed into law, the Save Local Business Act would attempt to clearly define joint employment under these two federal statues enforced by the National Labor Relations Board and the US DOL, respectively.
Bill could be good news to franchisors and others
If it were to become law, the legislation could have significant benefits for franchisors, in particular, helping to possibly mitigate some of the risk of legal claims under the FLSA and NLRA for actions taken by franchisees, including but not limited to misclassification claims, failure to pay overtime, or a violation of employee rights to engage in protected and concerted activity under the NLRA.
Under the legislation as written, “an employer would be considered a joint employer to an employee” under these two laws “only if such person directly, actually, and immediately, and not in a limited and routing manner, exercises control over the essential terms and conditions of employment.” The terms and conditions would include:
- Hiring and firing;
- Setting individual employee pay rates and benefits;
- Day-to-day supervision of employees;
- Assigning work schedules, positions, and tasks; and
- Administering employee discipline.
It is important to remember that the bill only addresses the definition of joint employment under two of several federal statutes where liability for joint employers may be found. It does not necessarily carry over to enforcement by other agencies including the EEOC, who often finds joint employer liability under the laws they enforce. The legislation would also not require states to adapt their own definitions where they exist. And finally, the legislation would ultimately need to be interpreted by the courts where we have seen continued efforts to create new tests for joint employment.
Despite the limited scope of the Save Local Business Act, its supporters believe the legislation could go a long way in clarifying and even relieving joint employer liability for franchisors.
Bill starting path through Congress
The Save Local Business Act, a bipartisan effort, is just beginning its journey through the legislative process. Paychex will provide updates as the bill moves through Congress.