House Republican offers bill to reverse controversial labor rule

House lawmakers unveiled legislation Thursday to protect companies from being held liable for labor law violations committed by their subcontractors.

The Save Local Business Act, introduced by Rep. Bradley Byrne (R-Ala.), would change the National Labor Relations Act (NLRA) and the Fair Labor Standards Act (FLSA) to clarify that two or more employers must have “actual, direct, and immediate” control over employees to be considered joint employers.

The bill aims to kill the new standard created by a 2015 ruling in which the National Labor Relations Board (NLRB) said a company is considered a “joint-employer” with a contractor if it has “indirect” control over the terms and conditions of employment or has the “reserved authority to do so.”

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Businesses have argued that NLRB’s ruling increased litigation and operational expenses, and created more uncertainty about how to do business.

Michael Layman, executive director of the Coalition to Save Local Business, called Byrne’s bill the most important legislation for franchises in a generation.

“The Save Local Businesses Act is a common-sense approach small-business owners want,” he said in a call with reporters Wednesday.

As a result of the ruling, opponents claim franchisers have had to pull back on support they’ve previously offered franchisees or risk being pulled into litigation.

In an April op-ed, Reps. Tom MacArthur (R-N.J.) and Henry Cuellar (D-Texas) said communication and guidance are the foundation of a healthy franchise system.

“It is not a difficult concept: franchisees pay a franchise royalty fee to acquire support from a system forged in experience and success,” they wrote.

“Through this investment, they are given access to their brand’s best practices, which gives them a leg-up to success on their own.”

Republicans have offered similar legislation in the past to change the definition created by the NLRB ruling, but the new bill goes a step further, changing the definition of an employer in both the NLRA and the FSLA. 

House Education and Workforce Committee Chairwoman Virginia Foxx (R-N.C.) is co-sponsoring the legislation with Reps. Tim Walberg (R-Mich.) and Cuellar.  

Opponents of the bill fear companies will be able to evade labor laws by outsourcing works to subcontractors.

Catherine Ruckelshaus, general counsel at the National Employment Law Project, called the bill “disastrous.”