House Hearing Explores Legislative Remedy To Joint Employer Confusion

On July 12, 2017, the U.S. House Committee on Education and the Workforce held a hearing concerning the need for legislation to redefine the joint employer standard.1 As many employers are aware, the interpretation of when employers constitute "joint employers" has been expanded in the last few years, by the U.S. Department of Labor, the National Labor Relations Board, other regulatory bodies, and the courts. In the hearing, led by Chairwoman Virginia Foxx (R-NC), several witnesses highlighted the difficulties posed by the evolving joint employer standard, particularly for small businesses. Witnesses and representatives considered whether legislation could alleviate, or might aggravate, the confusion felt by many employers. This summary provides a background of this emerging issue as well as a brief overview of the hearing.

Evolution of the Joint Employer Standard

The rapid transformation of the joint employer standard began two years ago, with the National Labor Relations Board's August 27, 2015 ruling in Browning-Ferris Industries of California, Inc. There, the Board broadened the test for determining joint employment and assessing liability under the National Labor Relations Act (NLRA). The standard shifted from one where the purported joint employer exercised "direct and immediate" control over the other entity's employees, to a much looser "indirect" control standard. The case originated when the Teamsters Union sought to represent a staffing agency's employees working at a recycling facility and named the facility as a joint employer. The Board, disagreeing with its own regional director, concluded the staffing agency and its client were joint employers, relying on the facility's indirect control and reserved contractual authority over the supplied employees' essential terms and conditions of employment.

The Browning-Ferris holdingwhich is currently on appeal before the U.S. Court of Appeals for the D.C. Circuitupended decades of long-standing precedent. It also appeared to conflict with other Board guidance. In April 2015, for example, the Board issued an Advice Memorandum analyzing the relationship between a franchisee, Nutritionality, and its franchisor, Freshii, concerning the operation of a single casual restaurant in Chicago. In that guidance ("the Freshii Memo"), the Board's associate general counsel concluded that Nutritionality and Freshii were not joint employers, either under then-existing Board precedent or under the...