Hearing of the House Education and the Workforce Committee - Opening Statement of Rep. Scott, Hearing on Redefining Joint Employer Standards: Barriers to Job Creation and Entrepreneurship

Hearing

Thank you, Madam Chair.
In recent years, employers have increasingly moved away from direct
hiring of employees to the use of leased employees, perma-temps and
subcontracting as a means to reduce labor costs and shift liability.
Approximately 3 million Americans are employed by temporary staffing
agency on any given day, performing work on behalf of a client
company that directs the employee's work, but does not write the
employee's paycheck. Since the end of the recession in mid-2009,
almost one-fifth of all job growth has been through temp agencies.
Data shows that the consequences for workers employed in these
arrangements are lower wages, fewer benefits and less workplace safety.
And what marks these arrangements is that control over the employees'
employment is increasingly held by more than one employer. Our laborand employment laws have long held that more than one entity can serve
as an employer.
Without joint employer standards, contingent workers may have no
remedies for unfair labor practices, safety violations or wage theft.
To find that one or more entity is jointly responsible under an
employment or labor law requires a showing that two or more entities
share the right to control the work. While the Fair Labor Standards Act
and the Migrant and Seasonal Agricultural Worker Protection Act have a
broader definition of "employer," the National Labor Relations Act
(NLRA) and other statutes based in the common-law impose a narrower
test to find a joint employer.
There has been a torrent of misplaced criticism over the National Labor
Relations Board's (NLRB) August 2015 decision in Browning Ferris
Industries, where the NLRB held that the client employer (BFI) and the
staffing agency (Leadpoint) were joint employers at a municipal waste
recycling facility, and therefore had a joint duty to bargain with the
Teamsters Union. In that case, BFI exercised both direct and indirect
control over the employees of the staffing agency. Direct control
included oversight of employees' production, time card submissions,
setting line speed and rejecting the hiring of any individual selected by
the staffing agency. Reserved control included the contractual right to
set the maximum hourly pay the Leadpoint workers could earn. Of
course, collective bargaining over wages would be a futile exercise, if
the party that controlled the wage level was not at the table.
In the BFI decision, the NLRB reinstated the common law test for an
employer, as was called for in the Taft Hartley Act of 1947, by defining
an employer as one who controls or has the right to control the terms and
conditions of employment. This was the same test the NLRB applied in
many cases prior to 1984, a period -- I would note -- in which franchising
flourished.
However, between 1984 and 2002, the NLRB issued a series of
decisions that narrowed the common law test, eventually limiting an
employer to only those who exercised "direct and immediate" control
over employment matters. The newly expressed concern about
"redefining" who is a joint employer seems quite selective. Bush and
Regan-era Boards redefined the standard, and the Obama-era Board
restored the traditional common law standard.
The court in BFI plainly stated that the decision did not address joint
employer liability for franchisors. Yet, most of the criticism for the BFI
decision comes from franchisors such as McDonalds, which was named
as a joint employer in unfair labor practice complaints along with its
franchisees eight months prior to the BFI decision. That case is before
an administrative law judge.
Attacks against the common law standard used in BFI are cleverly
masked as concern for protecting the independence of franchisees. In
truth, the push to narrow the joint employment standard protects
franchisors at the expense of franchisees.
Last Congress, this Committee reported legislation that purported to
protect franchisees from franchisors taking over their business
operations because of concern about franchisors reducing potential joint
employment liability. The bill misleadingly named "Protecting Local
Business Opportunity Act" limited joint employers to those who have
"actual, direct, and immediate" control over employment matters.
However, what we learned is that this bill actually insulated a franchisor
from liability as a joint employer, leaving the franchisee solely on the
hook for decisions exercised through the franchisor's indirect control.
That bill should have been named the "Franchisor Empowerment Act",
because it freed franchisors from liability as a joint employer, while
opening the door for franchisors to exercise greater control over
franchisees' labor relations.
That point was underscored in testimony from the last Congress by
Professor Michael Harper where he noted that:
""[t]he BFI decision should help protect the decentralized franchise
model by encouraging franchisors to continue to rely on
independent franchisee control of employment decisions.''
Press reports indicate that the Majority will introduce legislation to nix
the NLRB's common law definition of joint employment under the
NLRA and shield some employers from having to collectively bargain
with workers. Apparently, the scope is yet to be determined, but
according to press reports, the U.S. Chamber of Commerce is involved
in crafting the proposal. Perhaps we will gain more clarity here today.
I welcome our witnesses, and want to thank them for taking the time to
prepare their testimony. I also want to express my appreciation for those
who had to travel some distance to be with us today, as we look forward
to hearing from you.

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