59–006 

114TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 114–355 

PROTECTING LOCAL BUSINESS OPPORTUNITY ACT 

DECEMBER 1, 2015.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. KLINE, from the Committee on Education and the Workforce, 

submitted the following 

R E P O R T 

together with 

MINORITY VIEWS 

[To accompany H.R. 3459] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Education and the Workforce, to whom was 

referred the bill (H.R. 3459) to clarify the treatment of two or more 

employers as joint employers under the National Labor Relations 

Act, having considered the same, report favorably thereon with an 

amendment and recommend that the bill as amended do pass. 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Protecting Local Business Opportunity Act’’. 

SEC. 2. TREATMENT OF JOINT EMPLOYERS. 

Section 2(2) of the National Labor Relations Act (29 U.S.C. 152(2)) is amended 

by adding at the end the following: ‘‘Notwithstanding any other provision of this 

Act, two or more employers may be considered joint employers for purposes of this 

Act only if each employer shares and exercises control over essential terms and conditions of employment and such control over these matters is actual, direct, and immediate.’’. 


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H.R. 3459, PROTECTING LOCAL BUSINESS OPPORTUNITY 

ACT 

COMMITTEE REPORT 

PURPOSE

H.R. 3459, the Protecting Local Business Opportunity Act, protects small businesses such as franchisees and subcontractors from 

an assault on their independence. The bill restores the long-held 

standard for determining ‘‘joint employer’’ status under the National Labor Relations Act (NLRA or the Act) that was recently 

overturned by a decision of the National Labor Relations Board 

(NLRB or the Board). Specifically, the bill codifies the standard 

used by the Board prior to August 27, 2015, by amending the 

NLRA to provide that two or more employers are joint employers 

only if each shares and exercises actual, direct, and immediate control over the essential terms and conditions of employment. 

COMMITTEE ACTION

113TH CONGRESS

Subcommittee holds NLRB oversight hearing 

On June 24, 2014, the Subcommittee on Health, Employment, 

Labor, and Pensions (HELP) held an NLRB oversight hearing titled ‘‘What Should Workers and Employers Expect Next from the 

National Labor Relations Board?’’ Witnesses before the subcommittee were Mr. Andrew F. Puzder, CEO, CKE Restaurants 

Holdings, Inc., Carpinteria, California; Mr. Seth H. Borden, Partner, McKenna Long & Aldridge, New York, New York; Mr. James 

B. Coppess, Associate General Counsel, AFL–CIO, Washington, 

DC; and Mr. G. Roger King, Of Counsel, Jones Day, Columbus, 

Ohio. Witnesses discussed upcoming NLRB cases as well as Board 

policy and cited changes to the joint employer standard as one of 

the most significant and controversial issues before the Board at 

that time. 

Subcommittee examines potential changes to the NLRB’s joint employer standard 

On September 9, 2014, the HELP Subcommittee held a hearing 

on potential changes to the NLRB’s joint employer standard titled 

‘‘Expanding Joint Employer Status: What Does it Mean for Workers and Job Creators?’’ Witnesses at the hearing were Mr. Todd 

Duffield, Shareholder, Ogletree, Deakins, Nash, Smoak & Stewart, 

Atlanta, Georgia; Mr. Clint Ehlers, President, FASTSIGNS of Lancaster and Willow Grove, Lancaster and Willow Grove, Pennsylvania, testifying on behalf of the International Franchise Association; Mr. Harris Freeman, Professor, Western New England University School of Law, Springfield, Massachusetts; Ms. Catherine 

Monson, Chief Executive Officer, FASTSIGNS International, Inc., 

Carrollton, Texas, testifying on behalf of the International Franchise Association; and Mrs. Jagruti Panwala, owner of multiple 

hotel franchises in the northeastern United States, Bensalem, 

Pennsylvania. Witnesses spoke about how an expanded joint emVerDate Sep 11 2014 01:43 Dec 06, 2015 Jkt 059006 PO 00000 Frm 00002 Fmt 6659 Sfmt 6602 E:\HR\OC\HR355.XXX HR355

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1 362 NLRB No. 186 (2015). 

ployer standard would negatively impact franchises and other 

small businesses. 

114TH CONGRESS

Subcommittee field hearing in Mobile, Alabama 

On August 25, 2015, the HELP Subcommittee held a field hearing titled ‘‘Redefining ‘Employer’ and the Impact on Alabama’s 

Workers and Small Business Owners’’ in Mobile, Alabama. Witnesses at this hearing were Mr. Marcel Debruge, Burr & Forman 

LLP, Birmingham, Alabama; Mr. Chris Holmes, CEO, CLH Development Holdings, Inc., Tallahassee, Florida; and Colonel Steve 

Carey, Owner and Operator, CertaPro Painters of Mobile & Baldwin Counties, Daphne, Alabama, testifying on behalf of the Coalition to Save Local Businesses and the International Franchise Association. Witnesses testified an expanded joint employer standard 

would threaten the independence of small businesses in Alabama 

and deter franchisors from licensing new franchisees. 

Subcommittee field hearing in Savannah, Georgia 

On August 27, 2015, the HELP Subcommittee held a field hearing titled ‘‘Redefining ‘Employer’ and the Impact on Georgia’s 

Workers and Small Business Owners’’ in Savannah, Georgia, regarding the NLRB’s joint employer standard. Witnesses at this 

hearing were Mr. Jeffrey Mintz, Shareholder, Littler Mendelson 

P.C., Atlanta, Georgia; Mr. Kalpesh ‘‘Kal’’ Patel, President and 

COO, Image Hotels, Inc., Pooler, Georgia; Mr. Alex Salgueiro, Savannah Restaurants Corp., Savannah, Georgia; and Mr. Fred Weir, 

President, Meadowbrook Restaurant Company Inc., Cumming, 

Georgia, testifying on behalf of the Coalition to Save Local Businesses and the International Franchise Association. Witnesses testified an expanded joint employer standard would hurt small business growth in Georgia and create significant barriers to entry for 

potential franchise owners. 

H.R. 3459, Protecting Local Business Opportunity Act, introduced 

On September 9, 2015, Representative John Kline (R–MN), 

Chairman of the Committee on Education and the Workforce, introduced the Protecting Local Business Opportunity Act (H.R. 3459). 

Recognizing the threat to small businesses posed by the NLRB’s 

decision in Browning-Ferris Industries of California, Inc. (BFI),1

the legislation amends the NLRA to restore the long-held standard 

that two or more employers can only be considered joint employers 

for purposes of the Act if each shares and exercises control over essential terms and conditions of employment and such control over 

these matters is actual, direct, and immediate. 

Senator Lamar Alexander (R–TN), Chairman of the Senate Committee on Health, Education, Labor, and Pensions, introduced companion legislation, S. 2015, on the same day. 

Legislative hearing on H.R. 3459, Protecting Local Business Opportunity Act 

On September 29, 2015, the HELP Subcommittee held a legislative hearing on H.R. 3459, the Protecting Local Business OpporVerDate Sep 11 2014 01:43 Dec 06, 2015 Jkt 059006 PO 00000 Frm 00003 Fmt 6659 Sfmt 6602 E:\HR\OC\HR355.XXX HR355

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2The NLRA does not cover all employees and employers in the United States. For example, 

public sector employers (state, local, and federal employees), employers covered by the Railway 

Labor Act (airlines and railroads), agricultural laborers, and supervisors are not covered by the 

Act. 29 U.S.C. § 152(2)–(3). 

tunity Act. Witnesses at the hearing were Mr. Ed Braddy, President, Winlee Foods, LLC, Timonium, Maryland, testifying on behalf 

of himself and the National Franchisee Association; Mr. Kevin 

Cole, CEO, Ennis Electric Company, Inc., Manassas, Virginia, testifying on behalf of the Independent Electrical Contractors; Mr. 

Charles Cohen, former Member of the NLRB and Senior Counsel, 

Morgan, Lewis & Bockius, LLP, Washington, D.C.; Ms. Mara 

Fortin, President and CEO, Nothing Bundt Cakes, San Diego, California, testifying on behalf of herself and the Coalition to Save 

Local Businesses; Mr. Michael Harper, Professor, Boston University School of Law, Boston, Massachusetts; and Dr. Anne Lofaso, 

Professor, West Virginia University College of Law, Morgantown, 

West Virginia. Witnesses testified H.R. 3459 would restore the 

joint employer standard that had worked well for workers and 

business owners for decades and would protect opportunities for 

small business growth. 

Committee passes H.R. 3459, Protecting Local Business Opportunity 

Act 

On October 28, 2015, the Committee on Education and the Workforce considered H.R. 3459, the Protecting Local Business Opportunity Act. Representative Buddy Carter (R–GA) offered an amendment in the nature of a substitute, making a technical change to 

clarify a reference to ‘‘employers’’ in the Act. The Committee voted 

to adopt the amendment in the nature of a substitute by voice vote. 

Five additional amendments were offered and ruled out of order, 

as they were non-germane to the underlying legislation. The Committee favorably reported H.R. 3459, as amended, to the House of 

Representatives by a vote of 21–15. 

SUMMARY

The Protecting Local Business Opportunity Act, will codify the 

NLRB’s previous ‘‘joint employer’’ standard used for decades prior 

to the Board’s decision in BFI on August 27, 2015. The bill amends 

the NLRA to provide that two or more employees may be considered joint employers under the NLRA only if each shares and exercises actual, direct, and immediate control over essential terms and 

conditions of employment. 

COMMITTEE VIEWS

BACKGROUND

In 1935, Congress passed the NLRA, guaranteeing the right of 

most private sector employees to organize and select their own representatives.2 The NLRA established the NLRB, an independent 

federal agency, to fulfill two principle functions: (1) to prevent and 

remedy employer and union unlawful acts, called ‘‘unfair labor 

practices’’ (ULPs), and (2) to determine by secret ballot election 

whether employees wish to be represented by a union. In deterVerDate Sep 11 2014 01:43 Dec 06, 2015 Jkt 059006 PO 00000 Frm 00004 Fmt 6659 Sfmt 6602 E:\HR\OC\HR355.XXX HR355

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3 NLRB v. Savair Mfg., 414 U.S. 270, 278 (1973). 4 29 U.S.C. § 141 et seq. 5 Archibald Cox, Some Aspects of the Labor Management Relations Act of 1947, 61 Harv. L. 

Rev. 1, 4 (1947). 6 29 U.S.C. § 157. 

7 Id. § 158(b). 8 Id. § 158(c). 9 Id. § 159(d). 10TLI, Inc., 271 NLRB 798. 798–99 (1984), overruled by BFI, 362 NLRB No. 186 (Aug. 27, 

2015). 11 Airborne Express, 338 NLRB 597, 597 n.1 (2002) (‘‘essential element in [joint employer] 

analysis is whether a putative joint employer’s control over employment matters is direct and 

immediate.), overruled by BFI, 362 NLRB No. 186 (Aug. 27, 2015); AM Prop. Holding Corp., 350 

NLRB 998, 1000 (2007) (‘‘In assessing whether a joint employer relationship exists, the Board 

. . . looks to the actual practice of the parties.’’), overruled by BFI, 362 NLRB No. 186 (Aug. 

27, 2015). 12Protecting Local Business Opportunity Act: Hearing on H.R. 3459 Before the House 

Subcomm. on Health, Employment, Labor, and Pensions, Comm. on Educ. and the Workforce, 

114th Cong. (Sept. 29, 2015) (written testimony of Charles I. Cohen at 3) [hereinafter Cohen 

Written Testimony]. 

mining whether employees wish to be represented by a union, the 

NLRA is wholly neutral.3

In 1947, Congress passed the most significant amendment to the 

NLRA, the Taft-Hartley Act,4 abandoning ‘‘the policy of affirmatively encouraging the spread of collective bargaining . . . [and] 

striking a new balance between protection of the right to self-organization and various opposing claims.’’ 5 The Taft-Hartley Act clarified that employees have the right to refrain from participating in 

union activity,6 prohibited unions from certain practices to coerce 

employees or employers,7 codified employer free speech,8 and made 

changes to the determination of bargaining units.9

Previous joint employer standard 

Prior to BFI, the NLRB used a long-held and well-established 

standard to determine whether two separate entities should be considered joint employers. This standard analyzed whether alleged 

joint employers shared control over or co-determined the essential 

terms and conditions of employment, including hiring, firing, discipline, supervision, and direction of employees.10 Notably, the 

Board required this control to be actual, direct, and immediate for 

finding joint employer status.11

At the legislative hearing on H.R. 3459, former Board Member 

Charles Cohen described the previous standard as follows: 

The Board’s prior standard struck an appropriate balance between a company’s right to manage its relationships 

with its contractors and suppliers, and the right of employees to organize a union and to have an employer at the bargaining table that is able to engage in meaningful collective 

bargaining. That standard ensured that a company was at 

the bargaining table if it exercised actual control over the 

terms and conditions of employment of its contractor’s employees, as opposed to potential or indirect control through 

the terms of the business agreement between the company 

and its contractor.12

BFI DECISION

In BFI, a Teamsters local sought to organize recycling sorters directly employed by Leadpoint Business Services (Leadpoint), a subcontractor of BFI. The Teamsters asserted BFI was a joint emVerDate Sep 11 2014 01:43 Dec 06, 2015 Jkt 059006 PO 00000 Frm 00005 Fmt 6659 Sfmt 6602 E:\HR\OC\HR355.XXX HR355

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13 BFI, 362 NLRB No. 186, slip op. at 2 (2015). 14 Id. at 16. 15 Id. 16 Cohen WrittenTestimony at 1–2 (emphasis in the original). 

ployer with Leadpoint. The NLRB regional director applied the established joint employer standard and found BFI did not exert sufficient control over Leadpoint’s employees to be a joint employer. 

The regional director directed an election with Leadpoint as the 

sole employer, and the Teamsters appealed. 

On appeal, the Board adopted a new, broader standard and 

found that BFI was a joint employer with Leadpoint. The Board 

held that two or more entities are joint employers if (1) there is a 

common-law employment relationship with the employees in question and (2) the putative joint employer possesses sufficient control 

over employees’ essential terms and conditions of employment to 

permit meaningful collective bargaining.13 The Board rejected the 

previous requirement that the joint employer’s control be actual, direct, and immediate, specifically overruling three decades of Board 

precedent.14 Instead, the ‘‘right to control,’’ even if it is not actually 

exercised, is now evidence of joint employer status.15 At the legislative hearing on H.R. 3459, former Board Member Cohen noted that 

under the new standard, ‘‘a joint employer relationship may be 

found based on the mere potential to control terms and conditions 

of employment, even if that control is indirect and/or 

unexercised.’’ 16

BFI dissenting opinion 

In response to the three-member majority’s decision, NLRB 

Members Phillip A. Miscimarra and Harry I. Johnson, III, wrote a 

scathing dissent. They noted that not only was the majority decision a radical departure from the current standard, but also that 

it has the potential to reach all manner of industries and greatly 

disrupt labor-management relations. 

Board Members Miscimarra and Johnson warned: 

In sum, today’s majority holding does not represent a ‘‘return to the traditional test used by the Board,’’ as our colleagues claim even while admitting that the Board has 

never before described or articulated the test they announce 

today. Contrary to their characterization, the new joint-employer test fundamentally alters the law applicable to usersupplier, lessor-lessee, parent-subsidiary, contractor-subcontractor, franchisor-franchisee, predecessor or successor, 

creditor-debtor, and contractor-consumer business relationships under the Act. In addition, because the commerce 

data applicable to joint employers is combined for jurisdictional purposes, the Act’s coverage will extend to small 

businesses whose separate operations and employees have 

until now not been subject to Board jurisdiction. [W]e believe the majority impermissibly exceeds our statutory authority, misreads and departs from prior case law, and 

subverts traditional common-law agency principles. The result is a new test that confuses the definition of a joint employer and will predictably produce broad-based instability 

in bargaining relationships. It will do violence as well to 

other requirements imposed by the Act, notably including 


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17 BFI, 362 NLRB No. 186, slip op. at 23–24 (Miscimarra and Johnson, Members, dissenting). 18 Id. at 38. 19See 29 U.S.C. § 157 (‘‘Employees shall have the right to self-organization, to form, join, or 

assist labor organizations, to bargain collectively through representatives of their own choosing, 

and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection . . .’’.). 20See Id. § 158(b)(4). In a secondary boycott, a union and its members refuse to work for, purchase from, or handle the products of a business with which the union has a dispute. 21 A ‘‘neutrality agreement’’ is a contract between a union and an employer under which the 

employer agrees to support a union’s attempt to organize its workforce. ‘‘Voluntary recognition’’ 

is when employees persuade an employer to voluntarily recognize a union after showing majority support by signed authorization cards or other means. 

the secondary boycott protection that Congress afforded to 

neutral employers.17

The dissenters went on to address the substantial impact the decision could have on contract negotiations: 

Collective bargaining was intended by Congress to be a 

process that could conceivably produce agreements. One of 

the key analytical problems in widening the net of ‘‘who 

must bargain’’ is that, at some point, agreements predictably will not be achievable because different parties involuntarily thrown together as the ‘‘bargainers’’ under the majority’s new test will predictably have widely divergent interests. Today’s marked expansion of bargaining obligations to other business entities threatens to destabilize existing bargaining relationships and complicate new ones. 

Even if one takes an extremely simplistic user-supplier scenario, the new standard’s conferral of joint-employer status—making many clients an ‘‘employer’’ of contractor employees, while making contractors an ‘‘employer’’ jointly 

with the clients—will produce bargaining relationships and 

problems unlike any that have existed in the Board’s entire 

80-year history which clearly were never contemplated or 

intended by Congress.18

CONSEQUENCES OF THE NEW JOINT EMPLOYER STANDARD

The BFI decision will have far-reaching consequences on labormanagement relations and the U.S. economy. While the framers of 

the NLRA never envisioned such a broad standard, BFI will benefit 

unions at the expense of small businesses on the picket line, at the 

bargaining table, and before the Board. The disastrous results— 

fewer jobs, greater corporate control over local businesses, and the 

disruption of commercial activity—will be reflected throughout the 

economy. 

Expanded union power 

Unions have long sought a broader test to protect ‘‘concerted activity’’ 19 and to bring more parties to the bargaining table. Prior 

to BFI, there were reasonable limits on union activity against neutral employers, such as secondary boycotts.20 However, if a previously neutral employer (i.e., a franchisor or contracting company) 

is deemed a joint employer, a previously illegal secondary boycott 

would then be NLRA-protected concerted activity. This would allow 

a union to pressure one of the employers into a neutrality agreement or voluntary recognition.21


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22 Cohen Written Testimony at 5 (citation omitted) (emphasis in original). 23 Redefining ‘‘Employer’’ and the Impact on Georgia’s Workers and Small Business Owners: 

Field Hearing in Savannah, Georgia, Before the House Subcomm. on Health, Employment, 

Labor, and Pensions, Comm. on Educ. and the Workforce, 114th Cong. (Aug. 27, 2015) (written 

testimony of Jeffrey Mintz at 9) [hereinafter Mintz Written Testimony]. 

Former Board Member Charles Cohen, testifying before the 

HELP Subcommittee, explained how BFI undermines the NLRA’s 

policy on secondary boycotts: 

In 1947, Congress explicitly amended the NLRA to prohibit ‘‘secondary’’ boycotts and picketing directed at neutral 

employers. Congress intended for secondary or neutral employers not to be drawn into labor disputes between an employer and its own employees. Now, in a single decision 

wholly unrelated to those secondary boycott provisions, the 

Board has undercut those very provisions by expanding the 

universe of ‘‘employers’’ that automatically lose neutral status based on their commercial relationship with a third 

party. . . . [O]nce deemed an ‘‘employer,’’ a formerly neutral company can be subject to union pressures at all of 

that company’s operations throughout the United States 

and not just the single site or area where the joint employer 

liability originated.22

Labor attorney Jeffrey Mintz, testifying before the HELP Subcommittee in Savannah, Georgia, also noted how expanding the 

joint employer standard will permit what were previously considered to be prohibited secondary boycotts: 

A business not previously exposed to labor disputes involving the employees of a business with which they engaged could become embroiled under the proposed standard. The NLRA generally permits unions to use economic 

weapons such as strikes, pickets and boycotts at an employer’s facilities if it has a labor dispute with the employer. 

However, the NLRA prohibits unions from using such economic weapons against ‘‘neutral’’ third parties. Where, however, a joint employer relationship exists between the employer directly involved in the labor dispute and a secondary employer, the joint employer is considered an ‘‘ally’’ 

of the primary employer, and consequently, loses the NLRA 

protection against union pressure. See, e.g., Teamsters 

Local 557, 338 NLRB 896 (2003) (noting that third party 

loses its neutrality where it exercises substantial control 

over picketers’ terms of employment).23

As discussed in the BFI dissent, with more parties at the table, 

unions can force employers with opposing interests to compete 

against one another. For example, a contractor might want greater 

control over work hours while the contracting employer’s primary 

concern is production. In such a situation, collective bargaining will 

now pit employers against each other to the union’s advantage. Mr. 

Cohen indicated such negotiations are unworkable: 

Now that two or more employers may be swept into union 

negotiations, either on all mandatory subjects of bargaining 

or perhaps only some, the Board has provided no guidance 

for how such bargaining is to work in practice. For inVerDate Sep 11 2014 01:43 Dec 06, 2015 Jkt 059006 PO 00000 Frm 00008 Fmt 6659 Sfmt 6602 E:\HR\OC\HR355.XXX HR355

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24 Cohen Written Testimony at 4. 25See, e.g., Letter from Joe Trauger, Vice President, Human Resources Policy, National Association of Manufacturers, to the Honorable John Kline, Chairman, House Education and the 

Workforce Committee (Oct. 26, 2015). 26Protecting Local Business Opportunity Act: Hearing on H.R. 3459 Before the House 

Subcomm. on Health, Employment, Labor, and Pensions, Comm. on Educ. and the Workforce, 

114th Cong. (Sept. 29, 2015) (written testimony of Kevin Cole at 3). 

stance, if the two or more putative employers have conflicting financial or commercial interests—as they often 

do—how are they to bargain a single collective bargaining 

agreement with a union? 24

New barriers for contractors 

The economic benefits of contract work will be greatly diminished 

by the new joint employer standard. For instance, many manufacturing plants contract out janitorial work so that they can efficiently focus on manufacturing. Under the new joint employer 

standard, however, the manufacturing company may be liable for 

the janitorial company’s employment actions and would be forced 

to bargain with the janitorial company’s employees. This would 

greatly reduce the benefits of contracting out work and make the 

manufacturing company less efficient as a result, which in turns 

threatens economic growth and job creation.25

Additionally, the threat of joint liability will stop many contractors from working with new or small subcontractors. Kevin Cole, 

CEO of the Ennis Electric Company, speaking on behalf of the 

Independent Electrical Contractors, testified to this at the legislative hearing: 

This new standard . . . prevents us from working with 

certain start-ups or new small businesses that may have a 

limited track record. For example, my company will take on 

certain small businesses as subcontractors, which will often 

times be owned by minorities or women, and help mentor 

them on certain projects. With this new standard, I’m now 

less likely to take on that risk. I am also less likely to bid 

on federal contracts over $1.5 million, under which the 

Federal Acquisition Regulation (FAR) system mandates I 

subcontract with small businesses.26

Destruction of the modern franchise model 

BFI will also irreparably disrupt the franchise model. Applying 

the new standard, franchisors may be joint employers with their 

franchisees based on indirect control of the franchisees’ operations. 

Thus, the NLRB’s expanded definition of joint employer will eliminate the primary benefit of the franchise system, which gives franchise small business owners complete discretion over their workforce while also enjoying the advantages of associating with a 

franchisor’s brand name. With franchisors and franchisees now 

deemed joint employers, the franchisor’s potential liabilities will go 

up, requiring increased involvement in franchisee stores. In addition, a franchisor deemed to be a joint employer will also now have 

to participate in collective bargaining with any of its franchisees 

that become unionized. These added liabilities and responsibilities 

will reduce franchisees’ independence and increase costs for the 


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27What Should Workers and Employers Expect Next From the National Labor Relations 

Board?: Hearing Before the House Subcomm. on Health, Employment, Labor, and Pensions, 

Comm. on Educ. and the Workforce, 113th Cong. (June 24, 2014) (written testimony of Andrew 

F. Puzder at 1). 28Protecting Local Business Opportunity Act: Hearing on H.R. 3459 Before the House 

Subcomm. on Health, Employment, Labor, and Pensions, Comm. on Educ. and the Workforce, 

114th Cong. (Sept. 29, 2015) (written testimony of Ed Braddy at 3). 29 Id. at 4. 

franchisor, costs that will transferred to small business owners and 

consumers. 

Furthermore, because of these increased liabilities, franchisors 

will be more restrictive with their franchise sales. They will likely 

require greater experience and resources from new franchisees, 

thereby reducing new small businesses opportunities under the 

franchise model. This will mean fewer opportunities for entrepreneurs, fewer businesses serving local communities, and less job 

growth in those communities. Testifying prior to the BFI decision 

at the HELP Subcommittee hearing on June 24, 2014, Andrew F. 

Puzder, CEO of CKE Restaurants Holdings, Inc., summarized the 

significant lost opportunities that will result from expanding the 

joint employer standard: 

The NLRB’s current standard has been in place for over 

30 years. During that time the franchise business model 

has proven enormously successful at enabling individuals 

to own and operate their own businesses, creating substantial economic growth and jobs. The franchise model has 

provided countless entrepreneurial opportunities for 

women, minorities, and veterans. If the NLRB were to 

change that standard so as to hold franchisors responsible 

as joint employers with their franchisees, it would significantly and negatively impact both the franchise business 

model and the small businessmen and businesswomen who 

have invested the time, energy and money in the hopes of 

becoming successful franchisees . . . .27

During hearings, the HELP Subcommittee heard from legal experts and franchise small business owners how BFI would cause 

harm to the franchise system. At the legislative hearing, Ed 

Braddy, a Burger King franchisee who owns and operates a restaurant in Baltimore, Maryland, warned ‘‘the new joint employer 

standard will destroy smaller restaurant operators like me.’’ According to Mr. Braddy, the new standard will result in franchisors 

repurchasing franchises, consolidating operations by selecting larger operators, or taking away the independence of franchisees by implementing detailed franchisee and employee policies, making him 

‘‘no more than a glorified manager in [his] own restaurant.’’ 28 Mr. 

Braddy concluded: 

I am concerned that those who created this new standard 

believe it will help the ‘‘little guy’’ and put more mandates 

on large corporations. As a one-store operator in an innercity neighborhood, I can tell you that nothing is further 

from the truth. The new joint employer standard will hurt 

me, my employees and the neighborhood I support. Please 

restore the definition to require actual, direct, immediate 

control over the essential terms of employment.29


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30 Id. (written testimony of Mara Fortin at 6). 31 Expanding Joint Employer Status: What Does it Mean for Workers and Job Creators?: Hearing Before the House Subcomm. on Health, Employment, Labor, and Pensions, Comm. on Educ. 

and the Workforce, 113th Cong. (Sept. 9, 2014) (written testimony of Jagruti Panwala at 3–4) 

(emphasis in original). 32 Id. (written testimony of Clint Ehlers at 5). 

Mara Fortin, owner of several Nothing Bundt Cakes franchises 

and speaking on behalf of the Coalition to Save Local Businesses, 

testified at the legislative hearing that due to the BFI decision, she 

could lose control of her own business. Ms. Fortin cautioned: 

My franchisor had nothing to do with hiring my employees or setting their wages and benefits. My franchisor has 

nothing to do with the day-to-day operations of my small 

business. But if they are to be considered a joint employer, 

my franchisor may decide to exert more control over my 

business, relegating me to a middle manager role for which 

I did not sign up.30

At the HELP Subcommittee hearing on September 9, 2014, 

Jagruti Panwala, an independent owner and operator of five hotels 

in the northeastern United States, also testified about her concerns 

that expanding the joint employer standard could cause her to lose 

control of her business. Mrs. Panwala stated: 

At its very core, any decision imputing liability for 

franchisees’ employment decisions onto the franchisor, may 

cause franchisors to impose control over the daily operations of each business in an effort to mitigate against any 

claims. Essentially, I would no longer be in business for 

myself. Moreover, with a more hands-on approach to the 

franchise relationship, franchisors may require an added 

presence at my properties. They may insist on reviewing 

employment matters in advance and try to direct the decision making process. If this were to happen, I would essentially become an employee of the parent corporation and no 

longer an entrepreneur. I would lose the equity I have built 

in my business overnight based on the decision of an 

unelected bureaucrat in Washington.31

Clint Ehlers, a FASTSIGNS franchisee also testifying at the September 9, 2014, hearing, expressed concerns about the threat of expanding the joint employer standard to the independence of his 

small business: 

I bought a franchise so that I could run my own business, not so that I could be a part of someone else’s. I take 

pride in my success, and hold myself accountable for my 

failures. . . . The real impact of a new standard that considers my franchisor the joint employer of my workers is 

that I will have less independence and less control over the 

business that I worked so hard to build.32

Retired Air Force Colonel and current CertaPro Paint franchisee 

Steve Carey explained at the Mobile, Alabama, field hearing how 

the new joint employer standard would reduce opportunities for 

prospective small business owners: 

If CertaPro is going to be responsible for the liabilities 

arising out of the operation of the business, and oversight 


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33 Redefining ‘‘Employer’’ and the Impact on Alabama’s Workers and Small Business Owners: 

Field Hearing in Mobile, Alabama, Before the House Subcomm. on Health, Employment, Labor, 

and Pensions, Comm. on Educ. and the Workforce, 114th Cong. (Aug. 25, 2015) (written testimony of Steve Carey at 4). 34 Id. (written testimony of Chris Holmes at 3). 35 Redefining ‘‘Employer’’ and the Impact on Georgia’s Workers and Small Business Owners: 

Field Hearing in Savannah, Georgia, Before the House Subcomm. on Health, Employment, Labor 

and Pensions, Comm. on Educ. and the Workforce, 114th Cong. (Aug. 27, 2015) (written testimony of Kal Patel at 3). 

of the workforce, why would they hand control over to me? 

Many businesses may feel this way and opportunities for 

local business ownership will decline dramatically. I know 

how fortunate I am to own my business after my long service in the military. While CertaPro provides advice and 

support, I am the decision-maker when it comes to my business. The success or failure of my business is, essentially, 

all on me—and that’s exactly what I signed up for. It 

would be a real shame to take these opportunities away 

from other veterans looking to start their ‘‘second life’’ as a 

local franchise business owner as well.33

Also testifying in Mobile, Alabama, Firehouse Subs franchisee 

Chris Holmes expressed similar concerns: 

While it is quite clear that the NLRB wants to negatively 

impact the business model of some of America’s largest 

companies through this action, it is ironic that what they 

will actually be doing is hurting America’s smallest businesses. The real effect will be small franchisee operators essentially losing their business to an often larger 

franchisor—making the large company larger and the 

franchisee extinct. If your goal was to push small business 

operators to the curb and stifle investment into new startup businesses, you couldn’t come up with a more effective 

tool than this joint employer decision.34

At the Savannah, Georgia, field hearing, Kal Patel, a hotel 

franchisee and past board member of the Asian American Hotel 

Owners Association (AAHOA), testified about the threat of a new 

joint employer standard to the franchise model: 

As an hotelier, I have come to depend on the franchise 

model as the most advantageous means to small business 

ownership. Consequently, I am deeply concerned that the 

NLRB’s efforts to expand the definition of joint employer 

status will transfer control of small businesses from independent hotel owners and operators to large corporations. 

An expanded joint employer legal standard intimated by 

the NLRB would compel franchisors to take an active role 

in staffing decisions due to the newly manufactured potential for liability. Franchisees, including the majority of 

AAHOA members, would lose independence in decision 

making and would effectively become employees of the 

franchisor because they would be forced to follow someone 

else’s directives.35

Alex Salgueiro, a Burger King franchisee, agreed. He concluded, 

‘‘The new joint employer standard as proposed by the NLRB will 


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36 Id. (written testimony of Alex Salgueiro at 3). 37 Id. (written testimony of Fred Weir at 3). 38 Redefining ‘‘Employer’’ and the Impact on Alabama’s Workers and Small Business Owners: 

Field Hearing in Mobile, Alabama, Before the House Subcomm. on Health, Employment, Labor, 

and Pensions, Comm. on Educ. and the Workforce, 114th Cong. (Aug. 25, 2015) (written testimony of Marcel Debruge at 5) [hereinafter Debruge Written Testimony]. 39Mintz Written Testimony at 2. 40 Expanding Joint Employer Status: What Does it Mean for Workers and Job Creators?: Hearing Before the House Subcomm. on Health, Employment, Labor, and Pensions, Comm. on Educ. 

and the Workforce, 113th Cong. (Sept. 9, 2014) (written testimony of Catherine Monson at 4). 

quickly destroy a successful business model which has been in 

place for decades.’’ 36

Fred Weir, a Zaxby’s franchisee, also spoke about the negative 

consequences of the new joint employer standard. He stated: 

Mr. Chairman, the new joint employer proposal from the 

NLRB would drain the life from the hundreds of thousands 

of small businesses that operate just like mine. The new 

standard would force operational changes on the 

franchisor, and on franchisees. Since the NLRB appears 

determined to change the measure of who controls the business, the balance of control between franchisor and 

franchisee will have to change. The franchisor’s magnified 

liability will mean substantially diminished control for the 

franchisee.37

In addition to the concerns expressed by franchisees, labor attorney Marcel Debruge argued at the Mobile, Alabama, field hearing 

that the new standard was ill-conceived from the perspective of 

management and franchisors. He cautioned, ‘‘[E]mployers are allbut-guaranteed to incur greater legal costs because they would 

share liability for a temporary employee or franchisee’s actions.’’ 38

Likewise, at the Savannah, Georgia, field hearing, labor attorney 

Jeffrey Mintz reasoned: 

Disturbing the well-established standard applied to determine whether a joint employer relationship exists and, 

more particularly, opting for a broader, ambiguous standard, would require many employers to revisit, analyze and 

likely revise their current business practices which could 

negatively impact many other businesses and their employees.39

The result of such revisions would likely be increased franchisor 

control and fewer locally owned franchises. As Catherine Monson, 

CEO of FASTSIGNS International, explained in her testimony at 

the September 9, 2014, hearing: 

Faced with potential liability for their franchisees’ employment decisions, franchisors may be forced to exercise 

operational control over all the employment and human resources decisions of franchisees, undermining the franchise 

business model. . . . This increased franchisor control 

would significantly disrupt the franchise relationship. 

Franchisors . . . would have less incentive to participate in 

the business model going-forward if they were responsible 

for areas of operation historically reserved to and exercised 

by their franchisees.40


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41 Cohen Written Testimony at 5. 42 Id. at 2. 43 BFI, 362 NLRB No. 186, slip op. at 37 (Miscimarra and Johnson, Members, dissenting). 44Mintz Written Testimony at 7. 45Debruge Written Testimony at 4–5. 

Former NLRB Member Cohen noted at the legislative hearing 

franchisors may respond in an alternative way. He argued the new 

standard would likely discourage franchisors from ‘‘promoting special hiring programs’’ for underrepresented groups, such as veterans, out of fear that these programs would be used as evidence 

of joint employer status with their franchisees.41

Other business relationships disrupted by BFI 

Franchises and contractors will not be the only ones hurt by the 

BFI decision. As Mr. Cohen testified, ‘‘This new ambiguous standard has the potential to apply to a wide variety of business relationships.’’ 42 In their BFI dissent, Board Members Miscimarra and 

Johnson discussed the numerous industries and businesses that 

may be jeopardized: 

The number of contractual relationships now potentially encompassed within the majority’s new standard appears to be virtually 

unlimited: • Insurance companies that require employers to take certain 

actions with employees in order to comply with policy requirements for safety, security, health, etc.; • Franchisors . . .; • Banks or other lenders whose financing terms may require 

certain performance measurements; • Any company that negotiates specific quality or product requirements; 

• Any company that grants access to its facilities for a contractor to perform services there, and then continuously regulates the contractor’s access to the property for the duration of 

the contract; 

• Any company that is concerned about the quality of the 

contracted services; 

• Consumers or small businesses who dictate times, manner, 

and some methods of performance of contracts.43

Testifying before the HELP Subcommittee, labor attorney Jeffrey 

Mintz also warned of the decision’s vast implications. As he noted, 

‘‘In addition to franchise businesses, a revised standard would affect relationships and have potential economic consequence within 

supply chains, dealer networks and staffing companies.’’ 44 Labor 

attorney Marcel Debruge further explained to the subcommittee 

that many automakers rely on the flexibility of temporary workers 

to survive during economic downturns, but they will likely be unable to continue this practice under the new joint employer standard.45 The new standard thus has the potential to interfere with 

countless business relationships. 

POST-BFI CASES

The Board will soon begin applying the expanded joint employer 

standard to subsequent cases, as the NLRB general counsel and regional directors already have. For example, on November 5, 2015, 


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46 Retro Environmental, Inc./Green JobWorks, LLC, Case 05-RC-153468 (NLRB Nov. 5, 2015) 

(order granting petitioner’s request for review of regional director’s decision and order). 47 Advice Mem., NLRB Office of the Gen. Counsel, Div. of Advice, Case Nos. 13–CA–134294, 

13–CA–138293, and 13–CA–142297 (Apr. 28, 2015). 48Protecting Local Business Opportunity Act: Hearing on H.R. 3459 Before the House 

Subcomm. on Health, Employment, Labor, and Pensions, Comm. on Educ. and the Workforce, 114th Cong. (Sept. 29, 2015) (oral testimony of Charles Cohen). 49See NLRB, McDonald’s Fact Sheet, https://www.nlrb.gov/news-outreach/fact-sheets/mcdonalds-fact-sheet. 

the Board granted review of a regional director’s dismissal of the 

union’s petition seeking to represent workers it claimed were jointly employed by a construction company and a staffing company.46

The grant of review indicates the Board may reverse the regional 

director’s decision and find joint employer status. In April 2015, the 

NLRB’s Associate General Counsel for the Division of Advice issued 

an advice memorandum in Nutritionality, Inc. d/b/a/ Freshii, concluding the franchisor was not a joint employer with its franchisees 

under both the pre-BFI standard and the new standard proposed 

by the general counsel in BFI.47 However, the memorandum tells 

us little about future Board decisions. As former Board member 

Charles Cohen pointed out to the HELP Subcommittee, the memorandum is not binding on the Board and has no precedential 

value.48 A single, fact-specific, non-binding advice memorandum is 

not evidence of anything but the narrow, prosecutorial decision 

made in that case. Moreover, this same general counsel has found 

merit and issued complaints in nearly 100 unfair labor practice 

charges alleging McDonald’s USA LLC is a joint employer with its 

franchisees.49

LEGISLATION IS NEEDED TO ADDRESS THE ACTIONS OF THE NATIONAL

LABOR RELATIONS BOARD

Congress is responsible for establishing and revising standards 

in federal labor law. The NLRB’s decision in BFI threatens the 

independence of small businesses and takes away opportunities for 

many Americans to own a business. The BFI decision extends liability to entities that have never been considered joint employers 

under the NLRA. The Protecting Local Business Opportunity Act 

will return certainty and predictability back to consumers, employees, and employers by reinstating the previous joint employer 

standard enjoyed for decades prior to BFI. H.R. 3459 will clarify 

that two or more employers will be considered joint employers 

under the NLRA only if each employer shares and exercises actual, 

direct, and immediate control over essential terms and conditions 

of employment. 

CONCLUSION

Over the last several years, the NLRB has issued multiple decisions and rules intended to benefit organized labor. By redefining 

what it means to be a joint employer, the NLRB has discarded decades of labor policy and set a dangerous precedent that will lead 

to higher costs for consumers, fewer jobs for workers, and less opportunity for individuals to realize the dream of owning a small 

business. The Protecting Local Business Opportunity Act will restore policies in place long before the NLRB’s most recent radical 

decision. This commonsense proposal will roll back a decision that 

will wreak havoc on working families and small business owners 


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across the country. This bill will restore balance to labor relations 

by preventing the disruption of countless small businesses—franchises, contractors, subcontractors, and other independent businesses—and allow future entrepreneurs to pursue the American 

Dream. 

SECTION-BY-SECTION ANALYSIS

The following is a section-by-section analysis of the Protecting 

Local Business Opportunity Act as reported favorably by the Committee. 

Section 1. Provides that the short title is the ‘‘Protecting Local 

Business Opportunity Act.’’ 

Section 2. Amends the National Labor Relations Act to allow two 

or more employers to be considered joint employers for purposes of 

the Act only if each shares and exercises control over essential 

terms and conditions of employment and such control over these 

matters is actual, direct, and immediate. 

EXPLANATION OF AMENDMENTS

The amendments, including the amendment in the nature of a 

substitute, are explained in the body of this report. 

APPLICATION OF LAW TO THE LEGISLATIVE BRANCH

Section 102(b)(3) of Public Law 104–1 requires a description of 

the application of this bill to the legislative branch. H.R. 3459 codifies the standard used by the Board prior to August 27, 2015, by 

amending the NLRA to provide that two or more employers are 

joint employers only if each shares and exercises actual, direct, and 

immediate control over the essential terms and conditions of employment. 

UNFUNDED MANDATE STATEMENT

Section 423 of the Congressional Budget and Impoundment Control Act (as amended by Section 101(a)(2) of the Unfunded Mandates Reform Act, P.L. 104–4) requires a statement of whether the 

provisions of the reported bill include unfunded mandates. This 

issue is addressed in the CBO letter. 

EARMARK STATEMENT

H.R. 3459 does not contain any congressional earmarks, limited 

tax benefits, or limited tariff benefits as defined in clause 9 of 

House rule XXI. 

ROLL CALL VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee Report to include for each record vote 

on a motion to report the measure or matter and on any amendments offered to the measure or matter the total number of votes 

for and against and the names of the Members voting for and 

against. 


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STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

In accordance with clause (3)(c) of House rule XIII, the goal of 

H.R. 3459 is to protect small businesses such as franchisees and 

subcontractors by restoring the long-held standard for determining 

‘‘joint employer’’ status under the NLRA. 

DUPLICATION OF FEDERAL PROGRAMS

No provision of H.R. 3459 establishes or reauthorizes a program 

of the Federal Government known to be duplicative of another Federal program, a program that was included in any report from the 

Government Accountability Office to Congress pursuant to section 

21 of Public Law 111–139, or a program related to a program identified in the most recent Catalog of Federal Domestic Assistance. 

DISCLOSURE OF DIRECTED RULE MAKINGS

The committee estimates that enacting H.R. 3459 does not specifically direct the completion of any specific rule makings within 

the meaning of 5 U.S.C. 551. 

STATEMENT OF OVERSIGHT FINDINGS AND RECOMMENDATIONS OF

THE COMMITTEE

In compliance with clause 3(c)(1) of rule XIII and clause 2(b)(1) 

of rule X of the Rules of the House of Representatives, the committee’s oversight findings and recommendations are reflected in the 

body of this report. 

NEW BUDGET AUTHORITY AND CBO COST ESTIMATE

With respect to the requirements of clause 3(c)(2) of rule XIII of 

the Rules of the House of Representatives and section 308(a) of the 

Congressional Budget Act of 1974 and with respect to requirements 

of clause 3(c)(3) of rule XIII of the Rules of the House of Representatives and section 402 of the Congressional Budget Act of 1974, the 

committee has received the following estimate for H.R. 3459 from 

the Director of the Congressional Budget Office: 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, Washington, DC, November 12, 2015. 

Hon. JOHN KLINE, 

Chairman, Committee on Education and the Workforce, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 3459, the Protecting 

Local Business Opportunity Act. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Christina Hawley Anthony, who can be reached at 226–2820. 

Sincerely, 

KEITH HALL. 

Enclosure. 


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H.R. 3459—Protecting Local Business Opportunity Act 

H.R. 3459 would amend the National Labor Relations Act 

(NLRA) to define ‘‘joint employer’’ to mean two or more employers 

who each share ‘‘actual, direct, and immediate control’’ over the 

terms and conditions of employment. In a recent ruling by the National Labor Relations Board, the Board concluded a ‘‘joint employer’’ relationship could be established when an employer exercises control over employment matters indirectly or such control is 

reserved to an employer by contract. In that ruling, the Board 

found that a company that had contracted with a staffing agency 

was a ‘‘joint employer’’ of the contract employees because the company had reserved the right to control some of the terms and conditions of their employment in its contract with the staffing agency. 

The bill would make it less likely that companies with similar contracting arrangements would be considered ‘‘joint employers’’ under 

the NLRA and, therefore, less likely such companies would be subject to collective bargaining and provisions related to unfair labor 

practices. 

Implementing the bill would not affect the operations of federal 

and state agencies because the NLRA excludes federal governmental entities as well as states and political subdivisions of states 

from the definition of ‘‘employer’’ under the act. 

Enacting H.R. 3459 would not affect direct spending or revenues; 

therefore, pay-as-you-go procedures do not apply. CBO estimates 

that enacting H.R. 3459 would not increase net direct spending or 

on-budget deficits in any of the four consecutive 10-year periods beginning in 2026. 

H.R. 3459 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act and would 

not affect the budgets of state, local, or tribal governments. 

The CBO staff contact for this estimate is Christina Hawley Anthony. The estimate was approved by H. Samuel Papenfuss, Deputy Assistant Director for Budget Analysis. 

COMMITTEE COST ESTIMATE

Clause 3(d)(1) of rule XIII of the Rules of the House of Representatives requires an estimate and a comparison of the costs 

that would be incurred in carrying out H.R. 3459. However, clause 

3(d)(2)(B) of that rule provides that this requirement does not 

apply when the committee has included in its report a timely submitted cost estimate of the bill prepared by the Director of the Congressional Budget Office under section 402 of the Congressional 

Budget Act. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (new matter is printed in italic 

and existing law in which no change is proposed is shown in 

roman): 


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CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (new matter is printed in italic 

and existing law in which no change is proposed is shown in 

roman): 

NATIONAL LABOR RELATIONS ACT 

* * * * * * * 

DEFINITIONS

SEC. 2. When used in this Act— 

(1) The term ‘‘person’’ includes one or more individuals, labor organizations, partnerships, associations, corporations, legal representatives, trustees, trustees in cases under title 11 of the United 

States Code, or receivers. 

(2) The term ‘‘employer’’ includes any person acting as an agent 

of an employer, directly or indirectly, but shall not include the 

United States or any wholly owned Government corporation, or any 

Federal Reserve Bank, or any State or political subdivision thereof, 

or any person subject to the Railway Labor Act, as amended from 

time to time, or any labor organization (other than when acting as 

an employer), or anyone acting in the capacity of officer or agent 

of such labor organization. Notwithstanding any other provision of 

this Act, two or more employers may be considered joint employers 

for purposes of this Act only if each employer shares and exercises 

control over essential terms and conditions of employment and such 

control over these matters is actual, direct, and immediate. 

(3) The term ‘‘employee’’ shall include any employee, and shall 

not be limited to the employees of a particular employer, unless the 

Act explicitly states otherwise, and shall include any individual 

whose work has ceased as a consequence of, or in connection with, 

any current labor dispute or because of any unfair labor practice, 

and who has not obtained any other regular and substantially 

equivalent employment, but shall not include any individual employed as an agricultural laborer, or in the domestic service of any 

family or person at his home, or any individual employed by his 

parent or spouse, or any individual having the status of an independent contractor, or any individual employed as a supervisor, or 

any individual employed by an employer subject to the Railway 

Labor Act, as amended from time to time, or by any other person 

who is not an employer as herein defined. 

(4) The term ‘‘representatives’’ includes any individual or labor 

organization. 

(5) The term ‘‘labor organization’’ means any organization of any 

kind, or any agency or employee representation committee or plan, 

in which employees participate and which exists for the purpose, 

in whole or in part, of dealing with employers concerning grievances, labor disputes, wages, rates of pay, hours of employment, or 

conditions of work. 


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(6) The term ‘‘commerce’’ means trade, traffic, commerce, transportation, or communication among the several States, or between 

the District of Columbia or any Territory of the United States and 

any State or other Territory, or between any foreign country and 

any State, Territory, or the District of Columbia, or within the District of Columbia or any Territory, or between points in the same 

State but through any other State or any Territory or the District 

of Columbia or any foreign country. 

(7) The term ‘‘affecting commerce’’ means in commerce, or burdening or obstructing commerce or the free flow of commerce, or 

having led or tending to lead to a labor dispute burdening or obstructing commerce or the free flow of commerce. 

(8) The term ‘‘unfair labor practice’’ means any unfair labor practice listed in section 8. 

(9) The term ‘‘labor dispute’’ includes any controversy concerning 

terms, tenure or conditions of employment, or concerning the association or representation of persons in negotiating, fixing, maintaining, changing, or seeking to arrange terms or conditions of employment, regardless of whether the disputants stand in the proximate relation of employer and employee. 

(10) The term ‘‘National Labor Relations Board’’ means the National Labor Relations Board provided for in section 3 of this Act. 

(11) The term ‘‘supervisor’’ means any individual having authority, in the interest of the employer, to hire, transfer, suspend, lay 

off, recall, promote, discharge, assign, reward, or discipline other 

employees, or responsibly to direct them, or to adjust their grievances, or effectively to recommend such action, if in connection 

with the foregoing the exercise of such authority is not of a merely 

routine or clerical nature, but requires the use of independent judgment. 

(12) The term ‘‘professional employee’’ means— 

(a) any employee engaged in work (i) predominantly intellectual and varied in character as opposed to routine mental, 

manual, mechanical, or physical work; (ii) involving the consistent exercise of discretion and judgment in its performance; 

(iii) of such a character that the output produced or the result 

accomplished cannot be standardized in relation to a given period of time; (iv) requiring knowledge of an advanced type in 

a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction and study 

in an institution of higher learning or a hospital, as distinguished from a general academic education or from an apprenticeship or from training in the performance of routine mental, 

manual, or physical processes; or 

(b) any employee, who (i) has completed the courses of specialized intellectual instruction and study described in clause 

(iv) of paragraph (a), and (ii) is performing related work under 

the supervision of a professional person to qualify himself to 

become a professional employee as defined in paragraph (a). 

(13) In determining whether any person is acting as an ‘‘agent’’ 

of another person so as to make such other person responsible for 

his acts, the question of whether the specific acts performed were 

actually authorized or subsequently ratified shall not be controlling. 


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(14) The term ‘‘health care institution’’ shall include any hospital, 

convalescent hospital, health maintenance organization, health 

clinic, nursing home, extended care facility, or other institution devoted to the care of sick, infirm, or aged person. 

* * * * * * * 


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1There were 13 complaints issued involving 78 alleged unfair labor practice charges. See: 

‘‘NLRB Office of the General Counsel Issues Consolidated Complaints Against McDonald’s 

Franchisees and their Franchisor McDonald’s, USA, LLC as Joint Employers,’’ NLRB Press Release, December 19, 2014. 2 Browning Ferris Industries of California and Teamsters Local 350, 362 NLRB No. 186 

(2015). 

MINORITY VIEWS 

In today’s increasingly fissured workplace, characterized by a 

myriad of subcontracting, employee leasing and temporary employment arrangements, ‘‘Who is the boss?’’ is a relevant question when 

it comes to determining who is accountable for bargaining with 

workers over the terms and conditions of employment. The ‘‘Protecting Local Business Opportunity Act’’ of 2015 (H.R. 3459) allows 

joint employers who share or codetermine employment-related decisions, but exercise that control indirectly, to avoid accountability 

for unfair labor practices or collective bargaining obligations under 

the National Labor Relations Act (NLRA). Allowing employers who 

retain the right to control the essential terms and conditions of employment to escape responsibility to bargain collectively with workers, would essentially eliminate the workers’ rights under the 

NLRA. 

The bill narrows the definition of ‘‘employer’’ under Section 2(2) 

of the NLRA (29 U.S.C. 152(2)) to provide that two or more employers are ‘‘joint employers’’ only if their control over the terms and 

conditions of employment is ‘‘actual, direct, and immediate.’’ This 

would replace the longstanding common law test which provides 

that an employer is one ‘‘who controls or has the right to control’’ 

the terms and conditions of employment, even if that ‘‘right to control’’ is not exercised. 

This legislation follows closely on the heels of two actions by the 

NLRB over the past year: 

1) The General Counsel of the National Labor Relations 

Board (NLRB) issued a consolidated complaint against McDonald’s USA, as a joint employer, along with its franchisees concerning alleged unfair labor practices in connection with demonstrations as part of the ‘‘Fight for $15 and a Union.’’ That 

case is in the early stages of pre-trial litigation, and its outcome is unknown.1

2) The NLRB’s August 27, 2015 decision in Browning Ferris 

Industries (BFI),2 where the Board reinstituted the common 

law test for determining whether two or more entities are joint 

employers. 

The BFI decision re-established a two-pronged test for determining if two or more entities are joint employers under the NLRA: 

(1) both are ‘‘employers’’ within the meaning of the common law; 

and (2) both share or codetermine those matters governing the essential terms and conditions of employment. 


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3See: Airborne Express, 338 NLRB 597 (2002) (The essential element in this analysis is 

whether a putative joint employer’s control over employment matters is ‘‘direct and immediate.’’) 4Press Release, Education and the Workforce Committee, September 9, 2015, on the introduction of H.R. 3459. 5Testimony of Fred Weir, President of Meadowbrook Restaurant Co., Inc., before the Subcommittee on Health, Employment, Labor and Pensions, Committee on Education and the Workforce, U.S. House of Representatives, August 27, 2015, pp. 2. Mr. Weir testified on behalf of the 

Coalition to Save Local Businesses (CSLB) and the International Franchise Association (IFA). 6See: Nutritionality, Inc., d/b/a Freshii, Case 13–CA -134294 et al., Advice Memorandum, 

April 28, 2015. http://apps.nlrb.gov/link/document.aspx/09031d4581c23996. 

That test had been in place prior to 1984, but had been systematically eroded though a series of decisions during the Reagan and 

Bush Administrations that were inconsistent with the common law. 

For example, a 2002 case held that for an entity to be a joint employer with another employer, it must exercise ‘‘direct and immediate’’ control. This was a new test that the Board applied without 

any explanation or even acknowledgment. Moreover, this new test 

was squarely at odds with the common law definition of employer.3

THE PURPORTED NEED FOR LEGISLATION TO PROTECT FRANCHISEES’ 

INDEPENDENCE IS CONTRADICTED BY TESTIMONY AT THE SEP- TEMBER 29, 2015 LEGISLATIVE HEARING

The Majority’s justification for this legislation is that the BFI decision will cause franchisees to lose control over their small businesses, and that the Board’s decision thus ‘‘threatens to steal the 

American dream from the owners of the nation’s 780,000 franchise 

businesses and millions of contractors.’’ 4 This argument is premised on the belief that the BFI decision established a precedent 

that will allow the NLRB to decide that McDonald’s USA is a joint 

employer with its franchisees, and therefore all franchisors will become liable as joint employers with their franchisees. In turn, the 

proponents hypothesize that this would spur franchisors to take 

over the day-to-day management of their franchisees as a means of 

limiting the potential liability created by their franchisees. This 

view is divorced from reality. 

First, contrary to the overheated hyperbole that the BFI decision 

is ‘‘designed’’ to ‘‘eradicate franchising and irreparably damage 

every small business built on the franchise model,’’ 5 the NLRB 

takes a reasoned, case-by-case approach when assessing whether a 

franchisor is joint employer. For example, the NLRB’s General 

Counsel (GC) recently determined that Freshii’s, a fast-casual restaurant franchisor with over 100 stores in over a dozen countries, 

would not be deemed to be a joint employer of its franchisees, because its control was limited to maintaining brand standards and 

food quality. Freshii’s Operations Manual, which discusses employment policies, is optional. This NLRB guidance was published as 

an Advice Memorandum.6

Second, the argument that franchisees would be swallowed up by 

their franchisors because of the BFI decision was undermined by 

franchisee testimony at the September 29, 2015, legislative hearing 

on H.R. 3459 before the Subcommittee on Health, Employment, 

Labor and Pensions (HELP) of the Committee on Education and 

the Workforce. 

The two franchisee witnesses—a Burger King franchisee and a 

franchisee who operated six Nothing Bundt Cakes bakeries—testified that they feared the BFI decision would cause their franchisors 


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to take over employee relations at their franchisees in order to 

limit the franchisor’s joint employer liability. However, in response 

to questioning, both testified that they have absolute and total control over their employment policies, and that their respective 

franchisors do not exercise control over their business operations or 

have the right to exercise such control. 

Statement by Mara Fortin (owner and operator of Nothing 

Bundt Cakes franchises): ‘‘I hire my own workers, set their 

wages, benefit packages, et cetera. I manage my inventory and 

I purchase equipment. I pay taxes as my own small business 

with my own employer identification numbers. And I help my 

employees when they are in need of assistance. 

My franchisor plays no part in any of these key functions 

that only a true and sole employer performs.’’ 

Q. by Rep. Guthrie: ‘‘Do you or do [sic] the franchisor hire 

and fire and determine the work of your employees?’’ 

A. by Mr. Braddy (owner and operator of a Burger King franchise): ‘‘I schedule interviews every other Wednesday. I sit 

down with eight people every other Wednesday. Even though 

I am not hiring, I do the interviews because I always like to 

have a waiting list of people who want to work. 

So I do all the hiring. I don’t allow my managers or my assistants to terminate anyone because I want to make sure that 

once I let someone go it is for a good reason.’’ 

Q. by Rep. Guthrie: ‘‘But it is you as the business owner, not 

the—what role does the franchisor play in any of your—those 

issues?’’ 

A. by Mr. Braddy: ‘‘None at all.’’ 

Q. by Rep. Guthrie: ‘‘None at all. Thank you. My time expired.’’ 

Any unbiased reading of the BFI decision would not find these 

franchisees joint employers with their respective franchisors. 

Franchisees also contended that a contracting relationship where 

there is ‘‘potential control’’ could establish a joint employment liability. 

Testimony of Mr. Braddy: ‘‘In fact, the recent NLRB ruling 

in Browning-Ferris Industries of California, Inc., would allow 

those who indirectly affect my business—such as my 

landscapers and waste disposal company—to become my joint 

employer.’’ 

Q. by Rep. Polis: ‘‘I also want to go to Ms. Fortin. Now, in 

your case, from your testimony, you said the real-world consequences of the NLRB’s decision is it would lead to consolidation among our franchisors and loss of autonomy for local franchise business operations. 

My question is, how do you get that out of the BFI case, if 

it has to do with contractors? Or are you just talking about a 

hypothetical outcome for other cases that might be pending?’’ 

A. by Ms. Fortin: ‘‘I mean, I don’t think anyone here can 

truly answer what is going to happen. I look at words like ‘‘indirect,’’ ‘‘reserved,’’ ‘‘potential.’’ Any contractual relationship at 

that point is on the table.’’ 


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26 

It is a misreading of the Majority opinion in the BFI case to state 

that mere ‘‘potential control’’ or that ‘‘any contractual relationship’’ 

raises the possibility of joint employer liability. In fact, the Board 

rejected the General Counsel’s recommendation that ‘‘potential control’’ of labor relations may be sufficient to ground a joint employer 

relationship or ‘‘where industrial realities’’ make an entity essential 

for meaningful bargaining.’’ Rather, the Board Majority adopted 

the common law test that found the ‘‘right to control’’ labor relations necessary to ground a joint employer relationship if, for instance, such a right is enshrined in a contract between a contractor 

and sub-contractor. A ‘‘right to control’’ is a legal, not an economic 

concept. 

What has created confusion is a misleading dissent in the BFI 

decision which proclaimed that the Majority opinion had adopted a 

‘‘potential control’’ standard that would, among other things, treat 

parent corporations and their subsidiaries as joint employers. However, the Majority specifically declined to address that circumstance, or franchisor-franchisee law, and in no way adopted a ‘‘potential control’’ test. Instead, as required by the Taft-Hartley Act, 

the Board tethered joint employer law to the common law and limited its decision to the facts before it. 

THE LEGISLATIVE HEARING REVEALED THAT H.R. 3459 CREATES A PER- VERSE INCENTIVE THAT WOULD UNDERMINE FRANCHISEE INDE- PENDENCE

Two witnesses at the September 29 legislative hearing pointed 

out that an unintended effect of H.R. 3459 is that it would likely 

result in franchisors exercising more control over their 

franchisees—the very consequence that the Majority says it seeks 

to avoid. Dr. Ann Lofaso, a Professor of Law from West Virginia 

University, testified: 

‘‘[O]ne unintended and perverse effect of the proposed 

legislation is that it can embolden franchisors to take more 

control over the franchisee’s labor relations because it, the 

franchisor, would have less liability concerns.’’ 

Michael Harper, professor of law at Boston University and reporter for the recently completed Restatement of Employment Law, 

testified: 

‘‘I think that this legislation, if passed, would send a 

message that you can—to the franchisors or larger businesses—that you can control the employees of the 

franchisees if you use the franchisee owners, like Ms. 

Fortin, as a middle manager.’’ 

Thus, this bill reduces a franchisor’s potential liability as a joint 

employer and gives franchisors greater latitude to control the employment practices of their franchisees. Freed from liability as a 

joint employer, this bill will open the door for franchisors to exercise greater control over franchisees than they could exercise under 

the common law standard. 

As a corollary, the BFI decision benefits franchisees who want 

autonomy to manage their employment practices, because 

franchisors who involve themselves in their franchisees’ labor relaVerDate Sep 11 2014 01:43 Dec 06, 2015 Jkt 059006 PO 00000 Frm 00026 Fmt 6604 Sfmt 6604 E:\HR\OC\HR355.XXX HR355

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7 U.S. Representative Phil Roe (R–TN) Press Release, August 27, 2015. 

8 ‘‘Essential terms and conditions of employment’’ include hiring, firing, discipline, supervision, 

and direction. It can also include dictating the number of employees to be supplied; controlling 

scheduling, seniority, and overtime; assigning work; and determining the manner and method 

of work performance. 

tions will risk incurring a bargaining obligation and/or other liability under the NLRA. That potential liability will incentivize 

franchisors to distance themselves from control over their 

franchisees’ labor relations. 

That point was underscored by Professor Harper in his written 

testimony: 

‘‘[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.’’ 

FRANCHISING FLOURISHED UNDER THE TRADITIONAL JOINT EMPLOYER

TEST PRIOR TO 1984

The BFI decision does not ‘‘upend a franchise model that has 

worked well for decades.’’ 7 Prior to 1984, franchisors faced the 

same legal landscape on the joint employer issue as that established under BFI, and none of the disasters arose that are being 

predicted by the advocates of this legislation. In fact, the franchising model flourished during that time. As Professor Harper testified, this fact undermines the claim that the BFI decision somehow threatens franchising or other efficient forms of business cooperation. 

Moreover, if a franchisor wants to avoid joint employer status, it 

can simply modify its franchising agreement so that it does not 

have sufficient control of the employees’ terms and conditions to 

incur an obligation to bargain. As Professor Harper testified at the 

hearing: 

‘‘If a franchisor continues to delegate authority over all 

employment decisions to its franchisees, and retains no 

right to control scheduling or work pace or other conditions 

of employment, it cannot be subject to bargaining obligations.’’ 

THE HISTORY OF THE NLRB’S JOINT EMPLOYER STANDARD IS ROOTED

IN THE TAFT-HARTLEY ACT OF 1947

Among the ‘‘employers’’ who may be joint employers under the 

NLRA are those employers who, while contracting with an otherwise independent company, have retained for themselves sufficient 

control over the ‘‘essential terms and conditions of employment’’ 

that the two companies share or codetermine those matters.8

The policy question is how much control is required for an entity 

to be deemed an ‘‘employer’’. Congress and the courts have relied 

upon the common law to help answer the question of who is an 

‘‘employer’’ in an employment relationship. 

The legislative history of the Taft-Hartley Act of 1947, a law intended to reduce the economic power of unions, stated that the definition of an employment relationship should be governed by the 


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9 Congressional Record, Senate, at 1575–1576 (1947), reprinted in 2 Legislative History of the 

Labor Management Relations Act, 1947, 51 (1948), and House Conf. Rep. No. 510 on H.R. 3020 

at 36 (1947) reprinted in 1 Legislative History of the Labor Management Relations Act, 1947, 

at 540 (1948). 10 NLRB v United Insurance 390 U.S. 254 (1968). 11See RESTATEMENT OF THE LAW OF AGENCY 1933, § 2(1); see also RESTATEMENT 

(SECOND) OF AGENCY 1958, § 2(1). 12 NLRB v. Browning Ferris Industries of Pennsylvania, Inc. 691 F.2d 1117, 1122–1123 (3rd 

Cir. 1982). 13 Airborne Express, 338 NLRB 597 (2002) (discussing whether a joint employer’s control is 

direct and immediate). 

common law principles of agency.9 In 1968, the Supreme Court 

stated that the ‘‘common law agency test’’ should be applied in establishing whether there is an employment relationship under the 

NLRA.10

As far back as 1933, the Restatement of Agency defines an employer as one who ‘‘controls or has the right to control the physical 

conduct of the other in the performance of the service.11 Thus, 

under the common law, the employer does not need to exercise direct 

and immediate control in order to determine the essential terms and 

conditions of employment, because the putative employer (the one 

purchasing labor services from another entity) can indirectly determine working conditions through contractual arrangements, such 

as setting salary caps on what the supplier of labor may pay its 

employees—whether such control is exercised or not. 

In 1982, the Third Circuit Court of Appeals reaffirmed that 

where two or more employers exert significant control over the 

same employees and the evidence shows that they share or co-determine those matters governing essential terms and conditions of 

employment, they constitute ‘‘joint employers’’ within the meaning 

of the NLRA.12 Yet two years later, beginning in 1984 (during the 

Reagan era) and for the next 30 years the NLRB began to narrow 

the joint employer standard to eliminate any consideration of evidence of the putative employer’s right to control, and by 2002 

(under the Bush administration) the NLRB required that the putative employer’s control must be ‘‘direct and immediate.’’ 13

Given the explosive growth of outsourcing, leasing and contingent work, and its responsibility to apply the NLRA to the ‘‘complexities of industrial life,’’ it was prudent for the NLRB to re-examine the joint employer test in BFI case and determine whether 

the traditional test for a joint employer that was in place prior to 

1984 should be reinstated. 

THE BFI DECISION APPROPRIATELY REJECTED THE ‘‘DIRECT AND IMMEDIATE CONTROL’’ TEST AND REINSTATED THE LONGSTANDING AND

MORE PREDICTABLE COMMON LAW TEST OF THE ‘‘RIGHT TO CONTROL’’ TEST

BFI operates a municipal recycling facility in Milpitas, California, but contracted with Leadpoint Business Services to hire 

many of the workers who carry out the sorting of recyclable materials under a cost reimbursement contract. BFI also employs 60 of 

its own employees at this facility. Teamsters Local Union sought to 

organize 240 Leadpoint workers, and named BFI as a joint employer in the petition for an election. 

In determining whether BFI and Leadpoint were joint employers, 

the NLRB followed the common law agency test as set forth in the 


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29 

14 NLRB issued an unfair labor practice complaint against BFI for its refusal to recognize or 

bargain with the union as a joint employer on October 23, 2015 (32–CA–160759). 15 170 NLRB 1332 (1968). 16 161 NLRB 1492, 1493 n.2 (1966). 

Restatement of Agency. It states that an ‘‘employer’’ is someone who 

‘‘controls or has the right to control’’ the essential terms and condition of employment. 

The NLRB found that BFI, while not directly employing the 

workers sorting recyclables, capped the maximum wage that 

Leadpoint could pay to its workers at a rate that could not exceed 

what BFI paid its own workers doing comparable work. BFI also 

set the line speed, assigned work to Leadpoint employees ahead of 

assignments made by Leadpoint, and retained the right to reject 

the hiring of any Leadpoint employee ‘‘for any reason or no reason.’’ 

As such, BFI codetermined hiring and disciplinary practices. Without compelling BFI to the bargaining table, the NLRB found that 

an essential party to negotiations would be missing. BFI is now 

challenging this decision.14

Proponents of this legislation dispute that the BFI decision merely returns to the pre-1984 holdings based on the common law test, 

and that pre-1984 cases show that actual control must be exercised 

in order for there to be a joint employer relationship, not simply 

the right to control. Former NLRB Member Charles Cohen testified 

at the legislative hearing that in ‘‘almost all’’ of the prior cases 

there was evidence of actual control by the joint employer. Unfortunately, Mr. Cohen did not provide any citations to support that contention in his testimony, and a review of pre-1984 joint employer 

cases finds a number where the ‘‘right to control’’ was used as the 

indicia of control over labor relations. 

• In the 1968 Southland Corporation, d/b/a Speedee 7-Eleven, 

case 15 the Board applied the same common law ‘‘right to control’’ 

test that the Board applied in BFI in finding that a franchisor was 

not a joint employer with a franchisee. The decision stated: 

‘‘We have long held that the critical factor in determining whether a joint employer relationship exists is the 

control which one party exercises over the labor relations 

policy of the other. It is immaterial whether this control be 

actually exercised so long as it may potentially be exercised by virtue of the agreement under which the parties 

operate.’’ 

This case is very similar to the facts and result in Freshii. As in 

Freshii, the franchisee was independently responsible for hiring, 

firing, discipline and all labor relations. Likewise, in both cases 

there was a very detailed policy manual covering operations and 

employee relations; however, there was no evidence that the 

franchisees were required to follow the recommendations contained 

therein. 

• In Hoskins Ready-Mix Concrete the Board affirmed that both 

the actual exercise of control set forth in a contract, as well as the 

power retained in a contract to exercise ‘‘overall supervision and direction’’ but not exercised, are separate indicia, and are each sufficient to find that an entity is a ‘‘co-employer.’’ 16


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17 162 NLRB 508, 509–10 (1966). 

• In Jewel Tea Co. a joint employer relationship was found because, although not exercised, a license agreement gave the Licensor ‘‘the power to control effectively the hire, discharge, wages, 

hours, terms and other conditions of employment’’ of the employees 

of licensees who conducted retail operations in Jewel Tea Company’s retail outlets. The Board stated: 

‘‘That the licensor has not exercised such power is not material, for an operative predicate for establishing a joint employer 

relationship is a reserved right in the licensor to exercise such 

control . . .’’ 17

These cases show a consistency in reasoning over the breadth of 

almost seven decades. They also rebut the argument that the 

Board expanded the definition of an employer beyond its traditional common law moorings. 

THE ELEPHANT IN THE ROOM: THE MCDONALD’S CASE

Despite the very narrow focus of the BFI decision on a subcontracting relationship, franchisors are whipping up a controversy 

with their franchisees where none really exists. The BFI decision 

itself may have gone by barely noticed were it not for the unfair 

labor practice complaints against McDonald’s USA and dozens of 

its franchisees following a series of strikes and protests to increase 

pressure to raise the minimum wage and secure union representation for McDonald’s fast food workers as part of the ‘‘Fight for 15 

and a Union’’ campaign. 

The complaints alleged that McDonald’s USA and a number of 

its franchisees violated the NLRA by, among other things, threatening, discharging and disciplining employees in retaliation for engaging in union activity. McDonald’s USA was named a joint employer because it allegedly exercises significant control over the 

franchisee employees’ terms and condition of employment. 

As opposed to the Freshii’s case noted above, the NLRB’s General 

Counsel contends that McDonald’s control goes beyond what is necessary to accommodate a franchisor’s legitimate interest in protecting its brand. Importantly, the issuance of a complaint does not 

constitute the Agency’s final determination, and this matter is now 

in litigation before an Administrative Law Judge. 

Thus, any conclusions about what the McDonald’s case means for 

franchisees is premature, and any rush to legislate at this time is 

equally premature. Representative Jared Polis, Ranking Member of 

the HELP Subcommittee, stated at the conclusion of the legislative 

hearing: 

‘‘I think it is important the National Labor Relations 

Board follow their process, including in the pending 

McDonald’s case, without Congress prejudging their motives or undermining their authority before a decision is 

made. 

Once there is a ruling, I look forward to convening again 

and seeing whether there is any legitimacy to the fear that 

some of you have expressed with regard to the practices of 

your franchisees or franchisors. If there is, I think you will 


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18From Widgets to Digits: Employment Regulation for the Changing Workplace, Katherine 

Stone, pp. 67 (2004). 19See Id. See also U.S. Bureau of Labor Stat., Luo, et al., The Expanding Role of Temporary 

Help Services from 1990 to 2008, MONTHLY LAB. REV., August 2010, at 3, 4. 20WHO’S THE BOSS: Restoring Accountability for Labor Standards in Outsourced Work, National Employment Law Project, Catherine Ruckelshaus, Rebecca Smith, Sarah Leberstein, 

Eunie Cho, pp. 19 (May 2014). 21 U.S. Bureau of Labor Statistics, Contingent and Alternative Employment Arrangements, 

February 2005. 22The Contest Over ‘‘Employer’’ Status in the Postwar United States: The Case of Temporary 

Help Firms, George Gonos, 31 L. & SOC’TY REV. 81, 84–85 (1997). See also Stone, at, p. 68; Edward A. Lenz, Co-Employment—A Review of Customer Liability Issues in the Staffing Services 

Industry, 10 THE LAB. LAW. 195, 196–99 (1994) (describing various contingent employment arrangements). 23 Enforcing Labor Standards in Fissured Workplaces: The U.S. Experience, David Weil, 22 

THE ECON. & L. REL. REV. 33, 36–37 (2011). 

find great sympathy on both sides of the aisle; if not, then 

those fears are largely unwarranted and the [BFI decision] 

will not have any impact at all on your business.’’ 

THE CONTINGENT WORKFORCE IS PROLIFERATING, COMPELLING A REEXAMINATION OF THE INDUSTRIAL REALITIES CONFRONTING MILLIONS OF AMERICAN WORKERS WHO WORK FOR TEMPORARY OR PERMANENT STAFFING AGENCIES

The contingent workforce, i.e., temporary or part-time workers, 

and employees working under contract for a specific period or 

project, has steadily increased in prominence in the U.S. economy 

over the past several decades. Before the 1970s, temporary employment agencies generally only offered short-term secretarial help, 

day laborers, and nursing services, and did not represent a statistically significant portion of private sector employment. Around 

1975, however, ‘‘temporary employment agencies began to provide 

workers for many different types of jobs, including maintenance 

work, custodial services, legal services, and computer programming,’’ and thereafter began to experience tremendous growth.18

The temporary help services industry—a subset of the overall contingent workforce—grew from 518,000 to 1,032,000 workers during 

the 1980s, and reached over 1% of total employment by 1990. The 

percentage doubled to 2% by 2000.19 In 2013, there were approximately 3.4 million jobs in this staffing sector, accounting for 2.5% 

of U.S. employment.20 In February 2015, the most recent Bureau 

of Labor Statistics survey indicated that overall contingent workers 

accounted for as much as 4.1% of all employment, or 5.7 million 

workers.21

Contingent work arrangements involve a supplier of temporary 

help, a firm who ‘‘assigns’’ workers to a user firm, while the temporary help firm ‘‘place[s] these workers for legal purposes on [its] 

own payroll, billing client firms in an amount covering wages, overhead, and profit.’’ 22 This ‘‘pushes liability for adherence to a range 

of workplace statutes . . . outward to other businesses.’’ 23 The 

user firm can influence the supplier firm’s bargaining posture by 

threatening to cancel its contract with the supplier firm if wages 

and benefits rise above a set cost threshold. 

These developments, coupled with the facts of the BFI case, provided ample reason for the NLRB to revisit the joint employer 

standard. As the BFI decision stated: 


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24 Browning Ferris Industries of California and Teamsters Local 350, 362 NLRB No. 186 

(2015) 25 Congressional Record, Senate, at 1575–1576 (1947), reprinted in 2 Legislative History of the 

Labor Management Relations Act, 1947, 51 (1948), and House Conf. Rep. No. 510 on H.R. 3020 

at 36 (1947) reprinted in 1 Legislative History of the Labor Management Relations Act, 1947, 

at 540 (1948). 26See: Footnote 12 

‘‘[T]he primary function and responsibility of the Board 

. . . is that ‘of applying the general provisions of the Act 

to the complexities of industrial life.’ If the current jointemployer standard is narrower than statutorily necessary 

and if joint-employment arrangements are increasing, the 

risk is increased that the Board is failing in what the Supreme Court has described as the Board’s ‘‘responsibility to 

adapt the Act to the changing patterns of industrial 

life.’’ 24

H.R. 3459 CREATES AMBIGUITY IN THE NLRA’S DEFINITION OF EM- PLOYER AND JOINT EMPLOYER AND WILL SPAWN NEEDLESS UNCER- TAINTY

As noted above, the legislative history of the Taft-Hartley Act 

stated that the definition of an employment relationship should be 

governed by the common law principles of agency.25 Under the Restatement of Agency, an ‘‘employer’’ is one who ‘‘controls or has the 

right to control the physical conduct of the other in the performance of the service.’’ That definition is rooted in hundreds of years 

of common law. In contrast, H.R. 3459 creates a new test, requiring 

that a joint employer’s control must be ‘‘actual, direct and immediate.’’ The common law does not define these terms and they are 

not explained in Airborne Express, the 2002 NLRB case from which 

they are taken.26

The definition of joint employer under H.R. 3459 creates great 

uncertainty. Franchisees operating under the same franchise agreement may be treated differently based on whether the franchisor 

has recently exercised its control over some, but not others. And a 

franchisor may be a joint employer with a franchise today, but not 

tomorrow based on whether the franchisor is still exercising its authority. Rather than creating clarity, these terms raise questions: 

What does it mean for control to be ‘‘immediate?’’ Is control exercised two weeks ago sufficient? Two days? Two minutes? What is 

‘‘actual’’ control? Isn’t all control actual, whether or not it is direct? 

Adding these terms to the definition of ‘‘employer’’ will create uncertainty for employers and employees. 

AMENDMENTS

Five amendments were offered by Democratic Members at the 

October 28, 2015 mark-up, as part of an effort to refocus the Committee’s work on the unaddressed, but pressing needs of the American workforce. The legislation offered in these amendments is also 

included in the Working Families Agenda that is being promoted 

by Democrats to boost wages, help workers balance their work and 

family responsibilities, and level the playing field by ending workplace discrimination. 

1. Representative Polis offered as a substitute amendment, 

the Equality Act. The Equality Act adds ‘‘sexual orientation’’ 


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33 

and ‘‘gender identity’’ to the protections from employment discrimination in Title VII of the Civil Rights Act that already 

exist based on race, color, religion, sex, and national origin. In 

addition, the legislation includes protections from discrimination on the basis of sexual orientation or gender identity in 

housing, public accommodations, federal funding, credit and 

jury service. 

2. Representative Pocan offered as a substitute amendment, 

the Workplace Action for a Growing Economy (WAGE) Act. The 

WAGE Act strengthens protections available to workers under 

the NLRA by requiring employers to post employee rights 

under federal labor law; ensures that NLRB orders are enforced without undue delay; and authorizes monetary penalties 

for unfair labor practices. 

3. Representative Wilson offered as a substitute amendment, 

the Payroll Fraud Prevention Act. The Payroll Fraud Prevention Act amends the Fair Labor Standards Act (FLSA) to prevent the misclassification of workers as independent contractors that results in lost wages, and makes it a violation of the 

FLSA to misclassify employees. 

4. Representative Bonamici offered as a substitute amendment, the Schedules That Work Act. The Schedules That Work 

Act protects all employees from retaliation for requesting a 

more flexible, predictable or stable schedule; ensures that employers post schedules two weeks in advance; and provides additional pay for certain especially difficult shifts, including callin shifts, split shifts, and shifts from which employees are sent 

home early. 

5. Representative Clark offered as a substitute amendment, 

the Paycheck Fairness Act. The Paycheck Fairness Act will help 

close the wage gap by strengthening the Equal Pay Act of 1963 

in critical ways, including: requiring employers to prove that 

pay disparities between women and men are job-related and 

consistent with business necessity, putting the remedies for 

violations of the Equal Pay Act on par with the remedies for 

other civil rights violations, and prohibiting retaliation against 

workers for discussing their pay. 

The Chair ruled these five amendments were non-germane, and 

no vote was taken on the underlying amendments. 

ROLL CALL VOTE

H.R. 3459 was reported on a straight party line vote of 21 ayes 

and 15 nays. 

CONCLUSION

A primary goal of the NLRA is to help to restore the equality of 

bargaining power between employers and employees. At a time 

when there are millions of workers employed under arrangements 

that separate employees from the entity that directly or indirectly 

controls their terms and conditions of employment, H.R. 3459 

would deny workers the right to bargain with all of the entities 

that have effective control, whether that control is exercised or reserved. It is worth noting that in more than a third of union organizing drives, the employer fires at least one worker. Given that 


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such union avoidance strategies are commonplace, it is clear that 

workers employed by a subcontractor need protections from the dismissal of a subcontractor by the lead employer for engaging in activities protected under the NLRA. However, this bill undermines 

efforts to hold the lead employer accountable and could render the 

collective bargaining process futile. 

H.R. 3459 jettisons the longstanding common law used to define 

‘‘employer’’ in an employment relationship. In the BFI decision, the 

NLRB re-instated the common law of agency to determine whether 

an entity was a joint employer. The Taft Harley Act of 1947 directed the NLRB to use the common law of agency. This same test 

was in place prior to 1984, and subcontractors and franchising entities were able to prosper under that traditional test for a joint employer. 

This bill will further exacerbate wage stagnation and income inequality, by making collective bargaining a fruitless exercise in the 

increasingly fissured workplace. 

ROBERT C. ‘‘BOBBY’’ SCOTT, 

Ranking Member. 

MARK DESAULNIER. 

JOE COURTNEY. 

MARK TAKANO. 

JARED POLIS. 

SUZANNE BONAMICI. 

MARCIA L. FUDGE. 

RAU ́ L M. GRIJALVA. 

HAKEEM S. JEFFRIES. 

MARK POCAN. 

GREGORIO KILILI CAMACHO

SABLAN. 

KATHERINE M. CLARK. 

FREDERICA S. WILSON. 

SUSAN A. DAVIS. 

ALMA S. ADAMS. 

RUBE ́ N HINOJOSA. 

Æ 


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