Republicans aim to kill off Obama franchise standard

House Republicans are pushing to change an Obama-era rule to make it more difficult to find a company liable for a labor law violation committed by a subcontractor or franchise.

The Republicans say the current standard imposed by the National Labor Relations Board (NLRB) is too onerous for businesses.

{mosads}Under the existing standard, 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.” This means it can be found jointly liable for a violation.

Before 2015, companies were considered a joint-employer when the two entities exerted “direct” and “significant” control over the same employee, a lower standard.

Reps. Bradley Byrne (R-Ala.), Tim Walberg (R-Mich.) and other members of the House Education and the Workforce Committee are working on legislation to repeal the NLRB’s 2015 ruling that set the new standard.

“The impacts are real,” Shannon Meade, director of labor and workforce policy at the National Restaurant Association, wrote in a piece for RealClearPolicy last week.

Meade said restaurants are struggling to manage the risks involved in hiring contractors to do things like clean, handle the groundskeeping or wash table linens. She said some restaurants are trying to decide whether they can do the work themselves instead.   

Republicans have tried unsuccessfully over the last two years to block the labor board ruling from being enforced. Support for changing the standard from the Trump administration, however, has ushered in a new wave of hope.

“We also have a president who’s willing to sign it, who’s not pushing the Department of Labor to go against the flow of what has been traditionally our free enterprise system,” said Walberg, who added that he’s talked with the administration about the joint-employer issue and “they get it.”

Labor Secretary Alexander Acosta rescinded the Obama-era agency guidance on the joint-employer standard last month.

The guidance said the joint-employer standard extended to violations of the Fair Labor Standards Act. It also directed companies in a joint-employer relationship to aggregate their employees’ hours, including for the purposes of calculating overtime pay.

For the bill changing the standard to become law, Byrne acknowledged Republicans would need some votes from Democrats in the Senate, given the potential for a filibuster.

“We have to have some Democratic buy-in under the 60-vote rule in there. If you don’t get eight Democratic senators to help you, you’re not going to get a bill passed,” he said.

Rep. Bobby Scott (Va.), the ranking Democrat on the House Education and the Workforce Committee, said he thinks the current standard is working.

“Oftentimes, when a violation of the law occurs … many times the violation was caused both by one company and then by the temporary agency or franchisor,” he said. “You have joint liability. If you have joint cause, you ought to have joint liability.”

But Scott said Republicans aren’t just seeking clarity on the definition, as they have claimed.

“I think it’s designed not as a clarification but a bill to immunize franchisors from liability when they helped cause the problem,” he said, “and the issue of joint-employment only comes up when there’s a violation of the law.”

Rep. Raúl Grijalva (D-Ariz.) said he wouldn’t support a proposal to rescind the definition created by the Obama-era board.

He said Republicans are trying to weaken enforcement on the part of labor for wages, benefits, and health and safety conditions. Redefining joint-employer, he said, “becomes a convenient little ruse to avoid that.”

Republicans, however, claim they are trying to find a legislative fix that provides companies some relief while addressing Democrats’ concerns.  

“Finding the sweet spot around here sometimes is very difficult, but I do think there is a sweet spot to be had here,” Byrne said.

Byrne is hoping to get a bill filed before the House breaks for the August recess.

In the meantime, Republicans are using the appropriations process to try to stop the NLRB’s ruling from being enforced. Language has been added to a draft version of the 2018 Labor, Health and Human Services, and Education Appropriations bill to prohibit the respected agencies it covers from spending money to enforce the new definition. The House Appropriations Committee is expected to mark up the bill on Wednesday.

And industry challenge to the rule is currently making its way through the courts. A decision from the D.C. Circuit Court of Appeals is expected to come sometime this summer.