New Joint Employer rule is a lawsuit bomb

National Retail Federation

The National Retail Federation said joint employer standards issued today by the Labor Department are too broad and that Obama administration attempts to hold more companies responsible for the action of subcontractors or franchisees should be overturned by Congress.

“The Labor Department’s concept of a joint employer is even worse than what we’ve seen from the NLRB,” NRF Senior Vice President David French said. “Lawyers are already saying it’s only going to lead to more litigation. Congress has to stop the spread of this Orwellian big brother approach to government before it can go any further. This type of interference in well-established business practices is just one more roadblock to job creation and economic recovery. Ultimately, it’s American workers and families who will suffer.”

“Washington needs to understand that businesses can’t be held responsible for what they don’t control,” French said. “Subcontractors and franchisees are independent companies who make their own decisions on how to deal with their employees. Trying to treat large companies and smaller businesses as one large entity is just another effort to make life easier for organized labor.”

Guidelines released today by the Labor Department’s Wage and Hour Division would set a broad definition of what can be considered a joint employer, using language from the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act that defines employment as “to suffer or permit to work.” By contrast, National Labor Relations Act provisions cited by the NLRB in its joint employer rulings last year require an element of “directing and controlling.”

DOL would recognize two types of joint employers. Under a “horizontal” model, an employee would work for two or more employers that are only technically separate. Under a “vertical” model, the employee would work for an intermediary such as a staffing agency that in turn is hired by another company.

The current debate over joint employers began last year at the NLRB, but Wage and Hour is the third federal agency to become involved. Labor’s Occupational Safety and Health Administration is also considering whether to broaden the definition it uses, looking at whether franchisers can be held responsible for franchisees’ safety and health violations.

Under guidelines followed for more than 30 years, the NLRB held that a company had to have direct control over the actions of a subcontractor or franchisee’s employees in order to be considered a joint employer. However, in an August 2015 ruling involving the waste management company Browning Ferris Industries and staffing agency Leadpoint Business Services, the NLRB said a company could be considered a joint employer even if it had only indirect or unexercised control. In a separate case, the NLRB said McDonald’s could be considered a joint employer with its restaurant franchisees.

In October, the House Education and Workforce Committee approved legislation that would amend the NLRA to say a company can only be considered a joint employer if it has “actual, direct and immediate” control over essential terms and conditions of employment.

NRF is the world’s largest retail trade association, representing discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and Internet retailers from the United States and more than 45 countries. Retail is the nation’s largest private sector employer, supporting one in four U.S. jobs – 42 million working Americans. Contributing $2.6 trillion to annual GDP, retail is a daily barometer for the nation’s economy. NRF’s This is Retail campaign highlights the industry’s opportunities for life-long careers, how retailers strengthen communities, and the critical role that retail plays in driving innovation.
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