Congress is examining an Obama-era labor policy that Republicans say is a big threat to small businesses and entrepreneurs.
House Republicans examined the impact of the Obama administration’s expanded definition of what is known as the “joint employer standard.” Former President Barack Obama’s National Labor Relations Board (NLRB) radically changed the standard for determining who is an “employer” under the National Labor Relations Act (NLRA).
Both defenders and advocates for recension of the Obama-era standard testified before the House Committee on Education and the Workforce Wednesday, where they argued over the new standard and its impact on businesses.
The NLRB replaced its “direct and immediate” control standard for a broader standard based on “indirect” control in its 2015 Browning-Ferris decision. Up until Browning-Ferris, the NLRB used a “direct and immediate” control standard for determining joint employer status. If two separate businesses had actual authority over terms and conditions of employment and day-to-day supervision, they would be classified as a joint employer. The shift was the first time in decades that the NLRB considered indirect control as the main factor in determining whether a joint employment relationship exists.
North Carolina Republican Rep. Virginia Foxx, who chairs the committee, is leading the effort to roll back the rule. “Unfortunately, the Obama administration and partisan NLRB bureaucrats seemed determined to make it harder for small businesses and their employees to succeed, and the job-killing joint employer scheme is a prime example,” Foxx said Monday. “It is my hope that hearing firsthand accounts of the damage caused by the NLRB’s overreaching decision will bring this issue the attention it deserves, and that it will bring all of us closer to finding a solution for it.”
Mary Thompson, Chief Operating Officer of the Dwyer Group based in Waco, Texas, testified Wednesday that uncertainty surrounding the joint employer standard meant slow growth for franchisees. “We used to put up job descriptions to help franchisees, what would have taken an hour now takes months because of uncertainty,” Thompson said.
Democrats on the committee defended the new standard, asserting that it actually protects small businesses. Colorado Democratic Rep. Jared Polis accused Republicans of using a tired tactic by “attacking” the NLRB. Polis said that as a businessman, he never had an issue with the NLRB and that he didn’t even really know who they were.
“I didn’t know the NLRB either, because they weren’t in the middle of my business relationship like they are today,” Thompson replied.
Obama’s Department of Labor also issued administrative guidance that outlined its interpretation of joint employment under the Fair Labor Standards Act (FLSA). A joint employer is a scenario where two separate businesses share legal responsibilities over the same employee. The guidance offered a new analytical framework for evaluating joint employment that many in the business community said would increase litigation against employers. President Donald Trump’s Secretary of Labor Alex Acosta has since rescinded the informal guidance. (RELATED: Trump’s Department of Labor Resists Obama-Era Employment Rules)
“The joint-employer ruling has jeopardized opportunities for small businesses looking to franchise across the country. The standard overturned thirty years of bipartisan precedent, increasing compliance and legal costs, meanwhile leaving franchisees with less access to assistance and guidance from franchisors,” New York Republican Rep. Claudia Tenney told The Daily Caller News Foundation in June. “Since its inception, the joint employer ruling has been confusing and burdensome for businesses looking to grow and expand.”
Catherine Ruckelshaus, General Counsel and Program Director of the National Employment Law Project, asserted that a one-size-fits-all model will not work for the entire business community. Ruckelshaus has been a staunch defender of the Browning-Ferris decision.
Michael Harper, Professor of Law at Boston University, warned that congressional intervention could lead to additional uncertainty. Harper argued that certain undefined terms would be open to interpretation, saying, “Those words have not been interpreted and what they mean will not be clear.”
Small business groups and trade associations heralded the move by Congress to examine the Obama-era policy, from small businesses to the largest corporations in the world.
“Joint employment liability is affecting businesses all across the country, including restaurants. Congressional action is vital to resolving the damage caused by the NLRB over the past eight years,” Cicely Simpson, Executive Vice President of the National Restaurant Association, told TheDCNF. “We are pleased that Congress is taking this issue seriously, and we look forward to legislation being introduced.”
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