The Save Local Businesses Act Will Cost Workers

By Edward Nasser*

On Tuesday, November 7th, the House of Representatives voted to pass a bill that would narrow the definition of a joint-employer and reduce liability for companies that work with subcontractors or staffing agencies. The bill, misleadingly titled the “Save Local Businesses Act,” would effectively reverse the National Labor Relations Board’s 2015 decision in Browning-Ferris Industries of California, Inc. which allowed organizations with indirect control over employees to be considered their employer for violations of law and for the purpose of collective bargaining.

Prior to Browning-Ferris, a company needed to exercise “direct and immediate” control over the terms and conditions of employment in order to be considered a joint-employer. Browning-Ferris announced a new, expanded standard for when two or more organizations would be considered joint-employers of a single workforce under the National Labor Relations Act. If (1) the entities are both employers as defined by common law; and (2) they codetermine matters governing “the essential terms and conditions of employment,” they would be considered joint-employers. In evaluating whether an employer had sufficient control over employees to qualify as a joint employer, the Board considered—among other factors—whether an employer “affects the means or manner of employees’ work and terms of employment, either directly or through an intermediary.”

The decision in Browning-Ferris meant that a company that hired a contractor to staff its facilities may be considered a joint-employer of workers at that facility, even if the company did not actively supervise them. Companies could be held responsible for labor violations committed by contractors hired to staff its facilities and those workers would be legally entitled to collectively bargain with the “upstream employer,” and not just the contractor. The Board argued that the new standard better protected workers in the modern economy, where “the diversity of workplace arrangements” had “significantly expanded.” The Save Local Businesses Act would effectively reverse Browning Harris and codify the stricter “direct and immediate” standard in both the National Labor Relations Act and Fair Labor Standards Act.

For the last few decades, companies throughout the economy have focused their businesses on core competencies, often outsourcing support activities like payroll, accounting, human resources, and janitorial services. This phenomenon is known as the “fissured workplace,” and it has not only affected labor standards compliance, but lowered wages and limited employees’ access to benefits by insulating companies from the misdeeds of their contractors. Worse yet, the fissured workplace dilutes workers’ power by artificially segmented workers into tiny bargaining units. Browning-Ferris attempted to combat this development by holding parent companies responsible for the violations of their contractors and allowing workers to organize and bargain with the parent company, the employer who truly controls their workplace.

Business groups like the International Franchise Association and the National Restaurant Association loudly criticized the Board for Browning-Ferris, fearing that it would “significantly alter the face of American business” and “inflict serious damage to our nation’s economy.” A majority in the House apparently agreed; the Save Local Businesses Act passed with overwhelming Republican support and eight Democratic votes. In reality, the most the NLRA authorizes the NLRB to do is order an employer to bargain with workers, reinstate an employee fired in violation of the act, pay back wages to a wrongfully fired employee, or cease and desist from engaging in conduct that violates the act. The NLRA does not even provide for monetary damages against an employer. Congress and the NLRB should be working to extend the basic, modest protections of the NLRA to more workers, not making backwards progress.

Lobbyists and House Republicans have sought to frame the bill as a common-sense reform to encourage entrepreneurship and cut costs for small businesses. But the bill’s biggest impact will not be to protect mom and pop shops, but to effectively inoculate multinational corporations and franchisors from any liability for the terms and conditions they impose on contracted workers—especially those in low-wage sectors where wage theft and other workplace violations are prevalent. If it passes the Senate, the Save Local Businesses Act would be another blow against workers and the middle class.

*Edward Nasser is a 2L at Harvard Law School.




Old Paper by