Businesses, Complaining About 'Joint Employer' Rules, Call for Clarity

A FedEx Ground executive on Wednesday urged federal lawmakers to confront business uncertainty over labor regulators’ broad interpretation of who is an “employer” when it comes to the collective-bargaining rights of employees.

FedEx Ground vice president Richard Heiser and other stakeholders testified before the House Committee on Education and the Workforce about possible legislation over the so-called “joint employer” standard, a hot button issue since the National Labor Relations Board expanded the scope of relationships among companies that open them up to lability and collective bargaining.

GOP committee members indicated they want to introduce legislation to address the question of who is considered an employer, in the wake of the NLRB’s 2015 ruling in Browning-Ferris Industries v. the National Labor Relations Board. The agency broadened the definition of employer in that case, ruling that a business or organization with indirect control over contractors, franchisees or staffing agencies can be considered a “joint employer.”

The U.S. Court of Appeals for the D.C. Circuit is currently considering an appeal of that case. The court heard argument in March. 

During Wednesday’s hearing, Heiser suggested Congress pass legislation that would create a standardized definition of employer and created a safe harbor for businesses that have vendor compliance programs. He said there are a patchwork of regulations to consider that hamper business.

“Beyond FedEx, it’s hard to identify a business that does not contract with another company as a supplier or customer,” he said. “Under today’s standards, many businesses are at risk of being embroiled in contracted litigation or another company’s legal disputes. The current state of employment law results in uncertainty confusion and unnecessary legal issues.”

Heiser said there are too many tests that are complex, “with any claim raised and outcome defended.” He said FedEx believes it’s necessary to clarify consistency and a federal objection with simple standards to follow. The safe harbor would allow employers to proactively implement better programs.

His comments echo the concerns of many in the business community, who decried the NLRB’s decision as a new harm to business that would make companies vulnerable to union battles.

Employee rights advocates, however, said the standards protect workers against employers who attempt to skirt safety, wage or other laws meant to protect them.

“Low wage workers face problems in their workplace where they have more than one employer,” said Catherine Ruckelshaus, general counsel to the National Employment Law Project. “The workers who aren’t sure who their boss is and who is responsible for the job conditions. We were spending more and more time [and] were too often missing out on basic standards.”

Catherine Ruckelshaus, General Counsel and Program Director to the National Employment Law Project, testifies before the House Committee on Education and the Workforce during a hearing titled “Redefining Joint Employer Standards: Barriers to Job Creation and Entrepreneurship,” on July 12, 2017.Photo: Diego M. Radzinschi/ALM

Ruckelshaus also said business advocates who testified Wednesday appeared to “fear being an employer.” She said California and Illinois have passed laws that make contracting companies jointly liable for minimum wage and worker’s compensation.

Committee chair Virginia Foxx, R-North Carolina, said “unelected bureaucrats” launched an attack on small businesses, referring to the 2015 NLRB ruling.

“This created an enormous amount of uncertainty,” Foxx said. “We want to put an end to policy that makes it harder for entrepreneurs to pursue their dreams. We will restore common sense to what it means to be an employer.”

Any measure will face resistance from Democrats.

Rep. Bobby Scott, D-Virginia, said the stakes are high, with one-fifth of job growth in the United States coming from temporary agencies. This could mean lower wages, fewer benefits and less workplace safety.

“The control over employees' employment is increasingly held by more than one employer,” Scott said. “Without joint employer standards may have no remedies and safety violation or wage theft.”

Several witnesses expressed concern for potential and current franchisers. Jerry Reese, director of franchise development for New Orleans restaurant Dat Dog, told the committee he has 28 franchise agreements underway but believes the standards will hamper his business before he is able to get off the ground. Reese represented the Coalition to Save Local Businesses.

“We are in an unworkable Catch 22,” Reese said. “We need to clear up the basic question of what is an employer. No one here wants to make it harder for businesses to grow.”

Ruckelshaus said the concerns of the franchise representations and other business groups Wednesday were only hypothetical.

She said there are real examples where joint employment rules are necessary to protect workers. She listed examples of workers for a staffing agency at a plant that claimed it was not responsible for health and training issues. Another group of contractors, she said, were not being paid minimum wage and neither the contracting company nor the company where they worked took responsibility.

“We don’t want the workers to fall through the cracks,” she said.

Michael Harper, a professor at the Boston University School of Law, said employment boundaries lines are not vague, and he cautioned against any push for legislation. “This hearing is a reaction to a lobbyist manufactured tempest in the teapot,” Harper said. “The enactment of any legislation will use ambitious terms like ‘direct’ and ‘actual’ and ‘central’ and ‘meaty’… What do these mean? The courts will have to interpret these terms.”

Harper questioned the FedEx executive's concerns, arguing that the company’s model does not exemplify a joint employment relationship but instead misclassification of its workforce. Last year, FedEx settled lawsuits in 20 states over claims the company incorrectly classified workers as independent contractors.

Heiser repeatedly called for certainty during the hearing. “What we believe is that if a business knows they are being checked, they are more likely to comply with the law,” Heiser said.

Contributing Author

Erin Mulvaney

Erin Mulvaney writes for Law.com, sister site to BenefitsPRO.com.

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