Support Grows in States for Joint Employer Reversal

March 31, 2017

Nine states have enacted joint employer bills and 10 states are examining the issue in 2017.

By Jeff Hanscom

March marks the approximate halfway point of the state legislative session, and with that, an update on where bills are moving this year is in order. Similar to the last two state legislative sessions, IFA is once again pursuing a number of proactive bills clarifying the relationship between franchisors and franchisees for the purposes of state law. As a refresher, nine states have already enacted similar laws and 10 states are examining the issue in 2017.

Joint employer legislation is currently moving in: North Dakota, South Dakota, Wyoming, Arizona, Mississippi, South Carolina, New Hampshire, Missouri, Nebraska and Virginia. While it is never a sure bet whether legislation will ultimately succeed or fail, the majority of these states are likely to join the ranks of enacting this legislation.

Actions by state legislatures to clarify the employer-employee relationship comes on the heels of efforts at the federal level to expand the definition of “joint employer.”

In its 2015 decision, the National Labor Relations Board (NLRB) declared California-based recycling company Browning-Ferris Industries to be a joint employer with staffing services company, Leadpoint. This decision ignored more than 30 years of regulatory and legal precedent and retroactively adopted a far broader definition of joint employer than had ever been contemplated. Since the NLRB’s ruling, thousands of small business owners have engaged at both state and federal levels as part of an effort to educate elected officials and policymakers about the impact on locally-owned businesses.

Even with a “changing of the guard” in Washington, the joint employer issue has not been resolved and still requires a legislative solution. The Trump Administration cannot change the NLRB’s composition with the stroke of a pen.

The NLRB — the author of the expansive, unpredictable joint employer doctrine that is transforming business models and promoting litigation — is an independent federal agency that features staggered set terms for its members and general counsel. Most importantly, NLRB General Counsel Richard Griffin will continue to set the board’s agenda through 2017. Here is the chronological status of the current NLRB principals’ terms:

General Counsel Richard Griffin – term expires in November 2017.
Member Phil Miscimarra (R) – term expires in December 2017.
Chairman Mark Pearce (D) – term expires in August 2018.
Member Lauren McFerran (D) – term expires in December 2019.

While President Trump will have the chance to appoint two new board members early in his administration, it may be weeks or months until he offers nominations; potentially months after that until the Senate can approve the members; and possibly another year or more until the BFI precedent can be reversed through an NLRB case decision. Most importantly, a permanent legislative solution is needed because any board decision is fleeting, as a future Democratic-controlled NLRB can simply restore the BFI standard.

With a federal legislative solution still a good distance away, it is essential for the IFA to continue advancing these bills at the state level in order to ensure that the bureaucratic overreach from Washington and the business uncertainty it creates does not inject itself into local franchises in the states.

Jeff Hanscom is Senior Director of State Government Relations & Public Policy for the International Franchise Association.