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Congress Introduces Cure to Job-Killing 'Joint Employer' Standard

During the Obama administration, the National Labor Relations Board (NLRB) saddled job creators with an avalanche of red tape. The Board’s regulations now threaten worker flexibility and opportunity, as well as business formation, which impedes long-term economic growth and prosperity. Despite the change in administration, the NLRB burdens remain and still hold back employers from expanding and creating jobs.

Today, a bipartisan group of House members—sponsor Rep. Bradley Byrne (R-AL), along with Rep. Virginia Foxx (R-NC), Rep. Henry Cuellar (D-TX), Rep. Tim Walberg (R-MI) and Rep. Andy Harris (R-MD)—held a press conference to introduce the Save Local Business Act (H.R. 3441), which would restore the traditional joint employer standard that the NLRB upended and modifies the definition of joint employer under the Fair Labor Standards Act to be consistent with the definition under the National Labor Relations Act.

In August 2015, a NLRB decision unilaterally changed the three-decade-old definition of “joint employment” in a way that exposed tens of thousands of businesses across the United States to increased costs and liability. The NLRB instituted an extremely broad and vague definition under which companies may be held liable for labor violations committed by other employers with whom they contract, even if they only exercise indirect control over another employer. Previously, a company must exercise direct, immediate, and routine control over another company’s workforce to establish a joint employer relationship. In short, the legislation ensures the commonsense notion that an employer is only responsible for employees that they hire, supervise, and determine individual employee rate of pay.

Without the passage of the bill, the current job-crushing joint employer doctrine will continue to block entrepreneurship, reduce job creation, expand employer liability, increase employment insurance costs, lead to a surge in lawsuits, and disrupt thriving business models. One of the underlying motives of the NLRB’s move is to ease union organizing by giving unions bigger corporate targets that are easier to organize and intimidate into agreeing to card-check elections.

By greatly expanding joint employer liability, tens of thousands, if not more, business-to-business relationships are at risk, as well as the jobs these employers produce. An analysis from FRANdata, a data provider to the franchise industry, projected that at least 40,000 small businesses in over 75,000 locations would be put at risk from the NLRB’s new joint employer rule.

In addition, research from the American Action Forum estimates that the NLRB joint employer standard could result in 1.7 million fewer jobs.

At the press conference, Rep. Cuellar touched on another important issue:

We must ensure that our small businesses and franchises receive fair treatment from the government, and not confusion and arbitrary regulations that harm them. I have heard from small business owners throughout my district and the country, and it is clear that the NLRB’s joint employer decision was a major threat to the life of the franchise industry and the dream of business ownership for millions of Americans.

Small businesses and entrepreneurs are at grave risk from the NLRB joint employer standard. The uncertainty surrounding when a joint employer relationship is established has already forced the hand of employers when it comes to how they assist franchisees or other employers with whom they contract. Further, employers will bring back functions in-house that they once outsourced to small businesses because of the near-unlimited liability caused by the NLRB rule. Many small businesses rely on contracts from big businesses, but if larger companies are liable for labor violations of smaller businesses they contract with, they may decide it is not worth the risk.

It is of the utmost importance to repeal regulations, like the joint employer rule, that stifle small businesses. According to the Small Business Administration, small business is responsible for 66% of all net new jobs since the 1970s.

The House members at the press conference exuded confidence that they can quickly pass the Save Local Business Act. Hopefully, members of the Senate feel as strongly about protecting small business and good jobs as their colleagues.