Back from the Dead: NLRB’s Vague and Expansive “Joint Employer” Standard

By at 28 February, 2018, 1:36 pm


For Immediate Release

Washington, D.C. – On February 26, the National Labor Relations Board (NLRB) vacated their December 2017 decision that overturned the expansive, vague and impractical definition of “joint employer” adopted in the Obama-era.  The latest move by the NLRB, triggered by an Inspector General report, means small businesses must abide by the vague definition of joint employer, although uncertainty surrounding the standard has been ongoing given various definitions under other federal and state statutes. According to Small Business & Entrepreneurship Council (SBE Council) president & CEO Karen Kerrigan, the general confusion and NLRB’s erratic action should prompt Congress to fully act and stabilize the joint employer standard, which would bring much-needed certainty to small businesses.

CEI’s “Joint Employer” Event on Capitol Hill: (L to R) Trey Kovacs of CEI, Reem Aloul – Brightstar Care franchisee, Steven Johnson – Mr. Appliance franchisee, SBE Council president & CEO Karen Kerrigan.

Speaking at a February 27 Competitive Enterprise Institute event on Capitol Hill on the joint employer issue, Kerrigan said:

“The NLRB’s latest action to vacate its recent ruling only intensifies the need for a legislative solution. Specifically the Senate must move quickly and follow the House in passing the Save Local Business Act.”

The U.S. House passed H.R. 3441, the Save Local Business Act on November 7, 2017.  The bipartisan bill amends the National Labor Relations Act (NLRA) and the Fair Labor Standards Act (FSLA) to clarify that two or more employers must have “actual, direct and immediate” control over employees in order to be considered joint employers. The current standard replaced the common sense and long-standing “direct and immediate control” standard on joint-employer liability to the vague and expansive “indirect,” “potential” and “reserved” control definition.

The Senate has yet to introduce a bill or take action on this critical issue.  SBE Council joined a coalition of small business organizations and sent a letter to Senate leaders on February 15 urging action.  The NLRB’s decision to vacate the ruling demonstrates why it is important for Congress to act, as the NLRB could go back and forth on the matter. In addition, joint employer liability has been expanded under a host of federal and state statutes, which underscores the need for a uniform standard.

“Instability of joint employer is a major cloud that overhangs small businesses and harms entrepreneurship, the health of the franchise industry, and many if not most b-to-b relationships,” said Kerrigan at the event.

She noted that small business growth and opportunity could be undermined, especially the potential to do business with larger businesses and for individuals to start a franchise business.  She commented that joint employer litigation is swelling among larger businesses, which may crimp their willingness or ability to contract and do business with the small businesses in their supply chains.

“Unless we have certainty, clarity and a reasonable standard, small business opportunities are going to be restricted,” Kerrigan added.

Lastly, Kerrigan detailed how the current joint employer standard harms entrepreneurship and business growth, especially in the franchise sector, and that it is stopping many small businesses from franchising their businesses as the liability and legal risks are much too great.

“The bottom line is that the current joint employer standard and lack of a unified definition is creating a mess and new costs for all-size businesses. It is urgent that the Senate act,” concluded Kerrigan.

Related content and background information:

Encouraging Entrepreneurship and Business Expansion, November 2017, Small Business Insider blog post.

Joint Employer Rule Takes Another Turn With NLRB Decision, Workforce.

CONTACT:  Karen Kerrigan,

SBE Council is a nonpartisan, nonprofit advocacy, research and education organization that works to protect small business and promote entrepreneurship. For nearly 25 years SBE Council has worked to successfully implement a range of policy and private sector initiatives to strengthen the ecosystem for startups and small business growth. To learn more, visit SBE Council’s website: Follow on Twitter: @SBECouncil

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