IN OPPOSITION TO THE SAVE LOCAL BUSINESS ACT

November 7, 2017
Floor Statements

Mr. SCOTT of Virginia. Mr. Speaker, I rise in opposition to H.R. 3441, the so-called Save Local Business Act. Mr. Speaker, in recent years, employers have increasingly moved away from direct hiring of employees to the use of permatemps and subcontracting to reduce labor costs and liability. For many workers, the name on the door of the building where they work may not be the name of the company that technically signs their paycheck. 

   In situations like these, where more than one entity controls or has the contractual right to control the terms and conditions of employment, the National Labor Relations Act and the Fair Labor Standards Act hold both entities responsible for violations as joint employers. The joint employment standard under the NLRA ensures that workers can negotiate with all parties that control the terms and conditions of employment. Similarly, the joint employment standard under the FLSA ensures the appropriate companies can be held accountable for wage theft, equal pay, overtime pay, and child labor violations. 

   H.R. 3441 rewrites both the NLRA and the FLSA by establishing a narrow definition of joint employer that effectively eliminates accountability for some of the entities that are actually calling the shots. Under this bill, an entity may be a joint employer only if it ``directly, actually, and immediately'' exercises control over nine essential terms and conditions of employment, such as hiring, firing, determining rates of pay, and scheduling.

   However, an entity could have control over all nine of the essential terms, and if it indirectly exercises control through an intermediary, such as a subcontractor, then the entity would not be an employer because its control is not direct. This loophole would allow joint employers to evade liability for child labor or wage theft and undermine workers' ability to bring all of the entities to the bargaining table that actually control the terms and conditions of employment. 

   Alternatively, if an entity controls only eight of these nine essential terms and outsources the ninth, then it may also not be deemed a joint employer under this legislation. That is just a loophole. 

   Under this legislation, an employee could have no employer liable for a violation. This would arise when each of the joint employers raises a defense that they are not liable because they are not an employer, because they don't control all nine of the essential terms and conditions of employment. 

   This bill provides no guidance over how many of the essential terms the joint employer must control. Do they have to control two? a majority? all nine? 

   The consequence is that a court could find an employee is owed overtime, but nobody owes the money because nobody qualifies as an employer under the definition of the bill. This bill opens the door for potential chaos. And one thing for sure, H.R. 3441 does not provide the clarity that its proponents advertise. 

   Today, we are debating legislation that is based on a misplaced criticism of the National Labor Relations Board's 2015 decision in Browning-Ferris Industries, where the NLRB held that the client employer, BFI, and its staffing agency, Leadpoint, were joint employers at a recycling facility and, therefore, jointly had the duty to bargain with the union. 

   BFI capped wages that Leadpoint could pay and set scheduling, reserved the right to overrule Leadpoint's hiring decisions, and, if the NLRB had certified the union with only the staffing agency, Leadpoint, as the employer, then collective bargaining would have been a waste of time because Leadpoint was contractually limited in its ability to bargain without BFI's permission. 

   The BFI decision reinstated the common law definition of an employer, a precedent that had been in place at the NLRB for decades prior to 1984. Critics contend that the BFI case threatens the independence of franchisees. 

   Well, first, the BFI decision states that it does not cover franchising. Second, there are no decisions where a franchisor has ever been held to be a joint employer with its franchisees under either law. 

   Despite claims that H.R. 3441 would protect the independence of franchisees, legal experts point out that, under this bill, the bill actually insulates franchisors from liability, which leaves the franchisors free to exercise greater control over their franchisees' employee relations without liability. 

   Under this bill, if a franchisor directs actions that could violate wage or labor laws, then the franchisee is forced to accept this shared control, without shared responsibility. For example, suppose the franchisor directs the franchisee to designate all of the employees as managers and refuse to pay them overtime and the court comes in and says overtime was owed, then the franchisee is stuck with the bill because the franchisor is not an employer under this bill. That is not fair to small businesses and it is not fair to franchisees. 

   This legislation also creates perverse incentives by rewarding low-road construction contractors who compete by outsourcing entities that drive down costs by stealing wages, not paying overtime, and other violations. A national coalition of construction contractors is warned that H.R. 3441 would ``further tilt the field of competition against honest, ethical businesses.'' 

   For those reasons, Mr. Speaker, I urge a ``no'' vote.