By: George Morrison
On November 7, 2017, the U.S. House of Representatives passed the Save Local Business Act. While the fate of the legislation is uncertain in the Senate, if passed into law, the Act would substantially rein in the National Labor Relations Board’s (NLRB’s) and Fourth Circuit’s “joint-employer” rules. These rules vastly expanded the circumstances under which businesses could be held jointly liable for workplace violations involving employees of their independent contractors and franchises, as well as contract and temporary employees provided by or through staffing firms.
Many companies rely on the staffing industry to provide temporary labor to address fluctuations in workforce needs based on seasonality of the business or other factors that affect the volume of workers required. The NLRB in particular used the rule to its advantage to pursue major labor violations against McDonald’s Corporation, arguing it is responsible for actions by its franchisees as a joint-employer. The rule also expanded the scope of potential wage and hour claims under the Fair Labor Standards Act based on a joint-employer relationship. The Act would substantially curtail these claims by limiting the joint-employer relationship to only circumstances where two or more employers exercise actual, direct and immediate control over the same set of employees’ essential terms and conditions of employment. The Act was strongly supported by many trade associations including the HR Policy Association, the National Restaurant Association, the Retail Industry Leaders Association, the Society for Human Resource Managers and the International Franchise Association, while labor advocacy groups and unions remain opposed. We will continue to monitor any future developments relating to the Act.