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New Joint-Employer Bill Has Worker Advocates Leery

Law360—Vin Gurrieri

House lawmakers on Thursday introduced a bill to narrow the definition of joint employment under federal wage and labor law — a change that gives businesses welcome clarity for structuring deals with contractors but that employee advocates fear could shield companies that outsource labor from facing liability for workplace violations.

Introduced by Rep. Bradley Byrne, R-Ala., the Save Local Business Act would amend both the National Labor Relations Act and the Fair Labor Standards Act to say that a business can be deemed a joint employer only if it exercises direct, actual and immediate “significant control” over essential working conditions of particular workers.

Those essential terms and conditions are defined as including hiring and firing decisions, determinations of individuals’ pay rates and benefits, day-to-day supervision of employees, assignment of individual work schedules, assignment of positions and tasks, and worker discipline.

The standard outlined in the bill would override a much looser definition for joint employment in terms of the NLRA that the National Labor Relations board controversially adopted in a 2015 3-2 decision involving Browning-Ferris Industries of California. The ruling immediately inspired strong reactions both from unions and employee advocates who saw it as a step toward greater accountability for employers and from critics who said it created uncertainty, threatened franchise and contract relationships, and jeopardized jobs.

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... Catherine Ruckelshaus, general counsel at the National Employment Law Project, an employee advocacy group, told Law360 that the proposed law could have serious ramifications for workers, particularly those who don’t make much money or work in the sectors like agriculture or janitorial services, that try to fight back against practices like wage theft or unsafe working conditions.

If the bill passes, Ruckelshaus said, it will become easier for businesses to put layers between themselves and their workers — such as temp agencies or staffing service providers — that help the contractors avoid legal liability.

“If the bill goes into effect ... a lot of companies are going to use temp agencies or staffing companies and say ‘Not my problem’” when it comes to employees, Ruckelshaus said.

Rachel Bien, co-chair of Outten & Golden LLP’s class and collective action practice, similarly said that the bill would “undermine the concept of joint employment” and “set a high threshold to hold an employer who contracts or outsources work” liable for workplace law violations.

She added that many companies who contract work out still sometimes retain control over important aspects of workers’ jobs, such as specifying how products are made, but that employees under the proposed law would “only be able to effectively go after the subcontractor.”

“It increases the risk that workers are not going to be able to recover [damages] even where a contractor continues to exercise control of the work they are doing,” Bien said.

The labor board began the process of revising its joint employer standard in May 2014 when it called for input on whether to keep the existing standard as articulated in two 1984 labor board rulings or adopt a new one.

In the Browning-Ferris decision, which is on appeal at the D.C. Circuit, the labor board revised its test to say that a business could be deemed a joint employer if it exerts “indirect control” over a contractor or reserves for itself the ability to exert such control. The board used its revised test to determine that Browning-Ferris is a joint employer of recycling workers provided by staffing agency Leadpoint Business Services Inc.

The board majority said that its restatement of the joint employer standard constituted a return to the “traditional test” used by the labor board and endorsed in the Third Circuit's Browning-Ferris decision.

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...  Jim Hoffa, general president of the Teamsters union, said in a statement Thursday that rolling back the NLRB’s joint employer ruling “would reopen the door for unscrupulous companies to manipulate the system to avoid their responsibilities to temporary and contracted workers,” adding that the labor board’s 2015 ruling should remain intact because “all workers deserve fairness in the workplace.”

But besides the issue of whether workers will be able to pursue claims against certain putative joint employers, Congress’ proposed legislation may create some uncertainty in how courts actually analyze those cases.

Referencing the actions specified in the bill as essential terms and conditions of employment, Bien said the list cuts out many ways businesses that contract out work maintain control over workers. She noted that courts have come up with different factors that they use in analyzing potential joint employment relationships.

While some courts could take the position that Congress’ list was not exhaustive, other courts could take an approach if the law is enacted that the only factors they should consider when making such determinations are the ones specified in the bill.

“There is a strong risk that might happen,” Bien said.