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.

Ballard Spahr's Labor and Employment Group monitors the passage and implementation of federal and state employment laws and routinely assists clients in navigating and preparing for compliance with new laws.

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