May 26, 2020

House Passes Bill Limiting Joint-Employer Liability

The U.S. House of Representatives last week passed H.R. 3441—the Save Local Business Act—which, if enacted, would redefine the term "joint employer" under the National Labor Relations Act (NLRA) and the Fair Labor Standards Act (FLSA).

The act effectively rolls back the National Labor Relations Board's 2015 decision in Browning-Ferris Industries of California, Inc., which held that an employer is considered a joint employer with a business partner—such as a franchisee, staffing agency, or subcontractor—if it has either direct or indirect control over that entity's terms and conditions of employment or has reserved authority to exercise such control.

The Browning-Ferris decision significantly expanded who might be considered a joint employer under the NLRA, making it more likely that entities would be considered joint employers with their business partners. The act changes the definition of joint employer under both the NLRA and the FLSA to mandate that a person or entity would be considered a joint employer only if it:

directly, actually, and immediately, and not in a limited and routine manner, exercises significant control over the essential terms and conditions of employment, such as 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.

The act, therefore, limits joint employer liability to those who have actual control over essential terms and conditions of employment. The act now has moved to the Senate, where its fate is uncertain.

Employers should examine the actual or potential control, through direct or indirect means, they currently have over the employment of their business partners' workers to determine whether they are joint employers. This is particularly important in companies that utilize franchise or staffing models, which, under current law, could result in liability not only with respect to their own employees, but also regarding actions impacting employees of other entities—including collective bargaining obligations and wage-and-hour violations.

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About this Author

Patricia Smith, Ballard Spahr Law Firm, New Jersey, Labor and Employment Litigation Attorney

Patricia A. Smith represents management in all areas of employment and labor law and litigation. She has experience in a variety of industries, including health care, transportation, refining, manufacturing, construction, and commercial lending. Ms. Smith regularly provides advice and counseling to employers concerning the implementation of reductions in force and other difficult employment decisions. She also practices traditional labor law and regularly handles labor arbitrations, union organizing campaigns, collective bargaining negotiations, and unfair labor practice...

Sade Calin, Ballard Spahr Law Firm, New Jersey, Litigation Attorney

Sadé Calin is a member of the Litigation Department. Her experience includes the handling of labor and employment disputes, including discrimination cases, and serving as a court-trained mediator in landlord-tenant and municipal cases in Camden County, New Jersey. Before joining the firm full time, Ms. Calin was a summer associate at Ballard Spahr. She assisted with a variety of research projects, helped author chapters focused on at-will employment and attorney's fees in discrimination cases for the Employment Litigation in New Jersey treatise, and played a significant role in the firm's work on the Pennsylvania Innocence Project. Ms. Calin also gained experience working on projects involving commercial litigation and environmental litigation.

Flo, Washington DC, Ballard Spahr

A client-focused litigator and enforcement attorney, with extensive experience in the financial-services, technology, and real estate industries. Theodore R. ("Teddy") Flo represents lenders, technology companies, start-ups, corporate executives, and real estate service providers in local and national litigation, arbitration, and government investigations. While focused on investigations before the CFPB, he also represents clients before the SEC, DOJ, HUD, CFTC, and state regulators.

Teddy delivers practical cost-effective results for his clients through creative thinking and...