U.S. GOVERNMENT PUBLISHING OFFICE

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H.R. 3441, SAVE LOCAL BUSINESS ACT 

JOINT HEARING 

BEFORE THE

SUBCOMMITTEE ON WORKFORCE PROTECTIONS 

AND THE

SUBCOMMITTEE ON HEALTH, 

EMPLOYMENT, LABOR, AND PENSIONS 

OF THE

COMMITTEE ON EDUCATION 

AND THE WORKFORCE 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

HEARING HELD IN WASHINGTON, DC, SEPTEMBER 13, 2017 

Serial No. 115–27 

Printed for the use of the Committee on Education and the Workforce 

( 

Available via the World Wide Web: www.govinfo.gov 

or 

Committee address: http://edworkforce.house.gov 

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COMMITTEE ON EDUCATION AND THE WORKFORCE 

VIRGINIA FOXX, North Carolina, Chairwoman 

Joe Wilson, South Carolina 

Duncan Hunter, California 

David P. Roe, Tennessee 

Glenn ‘‘GT’’ Thompson, Pennsylvania 

Tim Walberg, Michigan 

Brett Guthrie, Kentucky 

Todd Rokita, Indiana 

Lou Barletta, Pennsylvania 

Luke Messer, Indiana 

Bradley Byrne, Alabama 

David Brat, Virginia 

Glenn Grothman, Wisconsin 

Elise Stefanik, New York 

Rick W. Allen, Georgia 

Jason Lewis, Minnesota 

Francis Rooney, Florida 

Paul Mitchell, Michigan 

Tom Garrett, Jr., Virginia 

Lloyd K. Smucker, Pennsylvania 

A. Drew Ferguson, IV, Georgia 

Ron Estes, Kansas 

Karen Handel, Georgia 

Robert C. ‘‘Bobby’’ Scott, Virginia 

Ranking Member 

Susan A. Davis, California 

Rau ́l M. Grijalva, Arizona 

Joe Courtney, Connecticut 

Marcia L. Fudge, Ohio 

Jared Polis, Colorado 

Gregorio Kilili Camacho Sablan, 

Northern Mariana Islands 

Frederica S. Wilson, Florida 

Suzanne Bonamici, Oregon 

Mark Takano, California 

Alma S. Adams, North Carolina 

Mark DeSaulnier, California 

Donald Norcross, New Jersey 

Lisa Blunt Rochester, Delaware 

Raja Krishnamoorthi, Illinois 

Carol Shea-Porter, New Hampshire 

Adriano Espaillat, New York 

Brandon Renz, Staff Director 

Denise Forte, Minority Staff Director 

SUBCOMMITTEE ON WORKFORCE PROTECTIONS 

BRADLEY BYRNE, Alabama, Chairman 

Joe Wilson, South Carolina 

Duncan Hunter, California 

David Brat, Virginia 

Glenn Grothman, Wisconsin 

Elise Stefanik, New York 

Francis Rooney, Florida 

A. Drew Ferguson, IV, Georgia 

Mark Takano, California, 

Ranking Member 

Rau ́l M. Grijalva, Arizona 

Alma S. Adams, North Carolina 

Mark DeSaulnier, California 

Donald Norcross, New Jersey 

Raja Krishnamoorthi, Illinois 

Carol Shea-Porter, New Hampshire 

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(III) 

SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR, AND PENSIONS 

TIM WALBERG, Michigan, Chairman 

Joe Wilson, South Carolina 

David P. Roe, Tennessee 

Todd Rokita, Indiana 

Lou Barletta, Pennsylvania 

Rick W. Allen, Georgia 

Jason Lewis, Minnesota 

Francis Rooney, Florida 

Paul Mitchell, Michigan 

Lloyd K. Smucker, Pennsylvania 

A. Drew Ferguson, IV, Georgia 

Ron Estes, Kansas 

Gregorio Kilili Camacho Sablan, 

Northern Mariana Islands 

Ranking Member 

Frederica S. Wilson, Florida 

Donald Norcross, New Jersey 

Lisa Blunt Rochester, Delaware 

Carol Shea-Porter, New Hampshire 

Adriano Espaillat, New York 

Joe Courtney, Connecticut 

Marcia L. Fudge, Ohio 

Suzanne Bonamici, Oregon 

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C O N T E N T S 

Page 

Hearing held on September 13, 2017 ..................................................................... 1 

Statement of Members: 

Byrne, Hon. Bradley, Chairman, Subcommittee on Workforce Protections 1 

Prepared statement of ............................................................................... 3 

Norcross, Hon. Donald, Ranking Member, a Representative in Congress 

from the state of New Jersey ....................................................................... 8 

Prepared statement of ............................................................................... 11 

Takano, Hon. Mark, Ranking Member, Subcommittee on Workforce Protections ........................................................................................................... 3 

Prepared statement of ............................................................................... 5 

Walberg, Hon. Tim, Chairman, Subcommittee on Health, Employment, 

Labor, and Pensions ..................................................................................... 6 

Prepared statement of ............................................................................... 7 

Statement of Witnesses: 

Granger, Mr. MacDonald, CEO, MacDonald Companies, Kerrville, TX ...... 14 

Prepared statement of ............................................................................... 16 

Kennedy, Ms. Tamra, President, Twin City T.J.’s Inc. Roseville, MN ......... 22 

Prepared statement of ............................................................................... 24 

Rubin, Mr. Michael, Partner, Altshuler Berzon LLP, San Francisco, CA ... 29 

Prepared statement of ............................................................................... 31 

Fasman, Mr. Zachary, Partner, Proskauer Rose LLP, New York, NY ........ 43 

Prepared statement of ............................................................................... 45 

Additional Submissions: 

Chairman Byrne: 

Letter dated September 12, 2017 for House Committee on Small 

Business .................................................................................................. 84 

Mr. Norcross: 

Primary case document ............................................................................. 10 

Mr. Takano: 

Letter dated July 28, 2017 from the Teamsters, SEIU, UAW, UFW, 

UFCW, AND USW ................................................................................. 95 

Letter dated September 7, 2017 from AFL-CIO ..................................... 93 

Letter dated September 19, 2017 from United Brotherhood of Carpenters and Joiners of America ............................................................ 98 

Slides .......................................................................................................... 88 

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H.R. 3441, SAVE LOCAL BUSINESS ACT 

Wednesday, September 13, 2017 

House of Representatives, 

Subcommittee on Workforce Protections, 

joint with the 

Subcommittee on Health, Employment, Labor, and Pensions, 

Committee on Education and the Workforce, 

Washington, D.C. 

The subcommittees met, pursuant to call, at 10:03 a.m., in Room 

2175, Rayburn House Office Building, Hon. Bradley Byrne [chairman of the subcommittee on Workforce Protections] presiding. 

Present: Representatives Byrne, Walberg, Wilson, Roe, Brat, 

Grothman, Stefanik, Allen, Lewis, Mitchell, Smucker, Estes, Handel, Foxx, Takano, Courtney, Fudge, Bonamici, Adams, DeSaulnier, 

Norcross, Blunt Rochester, Krishnamoorthi, Shea-Porter, and Scott. 

Staff Present: Bethany Aronhalt, Press Secretary; Andrew 

Banducci, Workforce Policy Counsel; Courtney Butcher, Director of 

Member Services and Coalitions; Michael Comer, Press Secretary; 

Rob Green, Director of Workforce Policy; Callie Harman, Professional Staff Member; Nancy Locke, Chief Clerk; Geoffrey Macleay, 

Professional Staff Member; Kelley McNabb, Communications Director; Rachel Mondl, Professional Staff Member; James Mullen, Director of Information Technology; Krisann Pearce, General Counsel; 

Molly McLaughlin Salmi, Deputy Director of Workforce Policy; 

Olivia Voslow, Legislative Assistant; Joseph Wheeler, Professional 

Staff Member; Lauren Williams, Professional Staff Member; 

Tylease Alli, Minority Clerk/Intern and Fellow Coordinator; Kyle 

deCant, Minority Labor Policy Counsel; Denise Forte, Minority 

Staff Director; Christine Godinez, Minority Staff Assistant; Eunice 

Ikene, Minority Labor Policy Advisor; Stephanie Lalle, Minority 

Press Assistant; Kevin McDermott, Minority Senior Labor Policy 

Advisor; Richard Miller, Minority Senior Labor Policy Advisor; 

Udochi Onwubiko, Minority Labor Policy Counsel; Veronique 

Pluviose, Minority General Counsel; Erin Robinson, Minority Policy 

Fellow; and Kimberly Toots, Minority Labor Policy Fellow. 

Chairman BYRNE. Good morning. A quorum being present, the 

subcommittees will come to order. 

Let me welcome everybody to a joint subcommittee hearing on 

H.R. 3441, the Save Local Business Act. We look forward to hearing 

from an excellent panel of witnesses who travel led from different 

parts of our country to be here today. We want all of you to know, 

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who have come to be here with us, that we appreciate the time you 

have taken away from your jobs and businesses to testify. 

To most Americans, the question over who their employer is 

seems to be an obvious answer. It is the person who hired them, 

the one who signs their paycheck. As a former labor attorney, I can 

tell you it used to be very clear in legal terms how you become 

someone’s employer. But that is no longer the case since the National Labor Relations Board stepped in. Many people would be 

shocked to find out that some company they have had zero contact 

with is also considered their employer in addition to the employer 

that actually hired them and signs a paycheck. 

Now, we all agree there are times when two or more employers 

should be deemed joint employers. Before the NLRB stepped in and 

overstepped, there was a commonsense understanding of the circumstances establishing that joint employer relationship. Both employers had to have, quote, ‘‘actual, direct, and immediate,’’ close 

quote, control, over the central terms and conditions of employment. 

That standard made sense. But today, business owners and their 

employees face a standard vastly different and far more confusing. 

They face a situation where a group of unelected bureaucrats in 

Washington are interfering with their relationship in a way that 

has created a lot of problems. The NLRB’s decision, the Obama administration’s actions that followed it, in addition to a litany of rulings by activist judges, have inserted a great deal of uncertainty 

and confusion into the traditional employer/employee relationship. 

Two completely separate employers can be considered joint employers if they made a business agreement that, quote, ‘‘indirectly,’’ 

close quote, or, quote, ‘‘potentially,’’ close quote, impacts their employees. 

Indirectly or potentially. What does that even mean? It’s vague, 

and it’s confusing. Think of it from the employee’s standpoint. 

There shouldn’t be any room for question on who their employer is. 

As for employers, they should have the clarity they need to look out 

for their employees in the way the law requires. Because in order 

for employees to have strong protections in the workplace, it needs 

to be crystal clear who was responsible for providing those protections. If everyone is, no one is. 

We are here today because we are determined to provide that 

clarity once and for all and protect jobs and small businesses in our 

communities. I’m proud to say that three of our Democratic colleagues, Representatives Chorea, Cellar, and Peterson are cosponsors of the Save Local Business Act, and we hope to continue to 

build bipartisan support so we can restore commonsense to the 

joint employer issue. 

This is an issue of great importance to both of our workforce subcommittees, which is why this critical legislation has been a joint 

effort with my colleague Mr. Walberg. Chairman Foxx has made 

the Save Local Business Act a top priority for the full committee, 

and this hearing will bring us one step closer to moving it through 

the legislative process. 

I’m going to give Mr. Walberg an opportunity to provide his own 

opening remarks, but before I do, I will yield to, Workforce ProtecCEWDOCROOM with DISTILLER

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tions Subcommittee Ranking Member Takano for his brief opening 

remarks. 

Mr. Takano. 

[The statement of Chairman Byrne follows:] 

Prepared Statement of Hon. Bradley Byrne, Chairman, Subcommittee on 

Workforce Protections 

To most Americans, the question over who their employer is seems to be an obvious answer. It’s the person who hired them, the one who signs their paycheck. 

As a former labor attorney, I can tell you it used to be very clear in legal terms 

how you become someone’s employer. But that’s no longer the case since the National Labor Relations Board stepped in. 

Many people would be shocked to find out that some company they’ve had zero 

contact with is also considered their employer, in addition to the employer that actually hired them. 

Now, we all agree there are times when two or more employers should be deemed 

‘‘joint employers.’’ Before the NLRB overstepped, there was a commonsense understanding of the circumstances establishing that joint employer relationship. Both 

employers had to have ‘‘actual, direct, and immediate’’ control over essential terms 

and conditions of employment. 

This standard made sense. But today, business owners and their employees face 

a standard vastly different, and far more confusing. They face a situation where a 

group of unelected bureaucrats in Washington are interfering with their relationship 

in a way that has created a lot of problems. 

The NLRB’s decision and the Obama administration’s actions that followed, in addition to a litany of rulings by activist judges, have inserted a great deal of uncertainty and confusion into the traditional employer-employee relationship. Two completely separate employers can be considered joint employers if they made a business agreement that ‘‘indirectly’’ or ‘‘potentially’’ impacts their employees. 

What does that even mean? It’s vague and confusing. Think of it from the employee’s standpoint. There shouldn’t be any room for question on who their employer is. 

As for employers, they should have the clarity they need to look out for their employees in the way the law requires. Because in order for employees to have strong 

protections in the workplace, it needs to be crystal clear who is responsible for providing those protections. 

We are here today because we are determined to provide that clarity once and 

for all and protect jobs and small businesses in our communities. I’m proud to say 

three of our Democrat colleagues, Representatives Correa, Cuellar, and Peterson, 

are cosponsors of the Save Local Business Act, and we hope to continue to build bipartisan support so we can restore commonsense to the joint employer issue. 

This is an issue of great importance to both of our workforce subcommittees, 

which is why this critical legislation has been a joint effort with my colleague, Mr. 

Walberg. Chairwoman Foxx has made the Save Local Business Act a top priority 

for the full committee, and this hearing will bring us one step closer to moving it 

through the legislative process. 

I’d like to give Mr. Walberg an opportunity to provide his own opening remarks, 

but before I do, I will yield to Ranking Member Takano. 

Mr. TAKANO. Thank you, Chairman Byrne. 

We are here today to discuss H.R. 3441, the Save Local Business 

Act. But I believe this bill is more accurately described as a gift to 

large corporations that will further rig the economy against workers. More and more employees are working for a company whose 

name is not on the front of their office building. Instead of hiring 

employees directly, companies are renting employees from staffing 

agencies and then evading responsibility for upholding the rights 

of those workers, even though they profit from their work. 

For decades, joint employment standards have ensured workers 

can hold employers accountable for violating wage and hour laws 

or refusing to collectively bargain. This bill represents a significant 

and dangerous break from that precedent. It denies millions of 

workers the right to hold their employers accountable for wage 

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4 

theft and undermines their ability to have the responsible parties 

at the table in order to collectively bargain for better wages. 

This bill amends the FLSA and the NLRA to set a very narrow 

standard for who can be considered a joint employer. By setting a 

standard that is far more restrictive than the existing economic realities test used under the FLSA, this bill would seriously undermine worker protections. 

We’ll hear today about a case involving workers at a Walmart 

warehouse that underscores the importance of the FLSA’s joint employment standards. In this case Walmart contracted out the operations of the warehouse to one company, and that company, in 

turn, contracted out the staffing of the warehouse. The contractors 

violated wage and hour laws. And because of the joint employment 

standard under the FLSA, 1700 workers were able to bring 

Walmart and both contractors to the table to collect the pay that 

they had earned. The joint employer standard plays an important 

role in protecting the rights of American workers and combating 

the extreme and crippling inequality in our economy, which should 

be the central focus and top priority of this committee. Unfortunately, our focus and our priorities have been elsewhere. 

Studies have shown that for every dollar invested in high-quality early learning programs, there are $7 in economic returns. As a 

teacher, I know that improving early learning -- early learning provides more children the opportunity to reach their full potential 

and puts more communities on the path to a better future. Yet, this 

committee has only held four hearings or markups on early childhood education since the 112th Congress. 

In comparison, as the chart shows, during that same time we 

have had 35 hearings and markups attacking labor unions and 

workers’ rights to collectively bargain for better wages and working 

conditions. 

Now, there’s a fine line between streamlining the economy and 

targeting workers’ rights, and I believe this committee has moved 

well past that line several hearings ago. Even when we debate federal wage and hour standards, we’re debating policies that would 

put financial stability even further out of reach for many workers. 

At no point since 2011, including in the 19 hearings and markups we’ve held on the subject, has this committee considered a single policy to raise workers’ pay or create a fair playing field for millions of hard-working people who are struggling to make ends 

meet. Workers do not have the leverage in the workforce. The joint 

employment standard offers them the basic ability to hold both 

their employer and the joint employer liable for wage theft claims. 

This bill would strip workers of one of the few areas of leverage 

they have left. Victims of our two-tiered economy need this committee to realign its priorities. As this chart shows, a recent study 

found that wages for the bottom half of earners were stagnant from 

1980 to 2014. In this same time, income for the top 1 percent grew 

by 205 percent. I’m going to say that again, 205 percent. 

So I challenge my colleagues, what are we going to do for the bottom half of income earners? I have great respect for small businesses, and I know the business owners here today will say that 

joint employer standards cause them uncertainty. And I’m not indifferent to your concerns. But I, too, am worried about uncerCEWDOCROOM with DISTILLER

5 

tainty. And it’s the uncertainty felt by millions of American workers who do not know if they’ll be able to meet their basic expenses 

and provide for their children. This is the type of uncertainty that 

no one should have to live with, and it’s the uncertainty that this 

committee is obligated to address. 

Thank you all for being here today, and I look forward to your 

testimony. 

[The statement of Mr. Takano follows:] 

Prepared Statement of Hon. Mark Takano, Ranking Member, Subcommittee 

on Workforce Protections 

We are here today to discuss H.R. 3441, the Save Local Business Act. But I believe this bill is more accurately described as a gift to large corporations that will 

further rig the economy against workers. 

More and more employees are working for a company whose name is not on the 

front of their office building. Instead of hiring employees directly, companies are 

renting employees from staffing agencies...and then evading responsibility for upholding the rights of those workers, even though they profit from their work. 

For decades, joint employment standards have ensured workers can hold employers accountable for violating wage and hour laws or refusing to collectively bargain. 

This bill represents a significant and dangerous break from that precedent. 

It denies millions of workers the right to hold their employers accountable for 

wage theft and undermines their ability to have the responsible parties at the table 

in order to collectively bargain for better wages. 

This bill amends the F–L-S–A and N–L-R–A to set a very narrow standard for 

who can be considered a joint employer. By setting a standard that is far more restrictive than the existing economic realities test used under the F–L-S–A, this bill 

would seriously undermine worker protections. 

We’ll hear today about a case involving workers at a Walmart warehouse that underscores the importance of the FLSA’s joint employment standards. In this case, 

Walmart contracted out the operations of the warehouse to one company, and that 

company in turn contracted out the staffing of the warehouse. The contractors violated wage and hour laws. 

And because of the joint employment standard under the FLSA, 17 hundred workers were able to bring Walmart and both contractors to the table to collect the pay 

they had earned. 

The joint employer standard plays an important role in protecting the rights of 

American workers and combating the extreme and crippling inequality in our economy, which should be the central focus and top priority of this committee. 

Unfortunately, our focus and our priorities have been elsewhere. 

Studies have shown that for every dollar invested in high-quality early learning 

programs...there are seven dollars in economic returns. As a teacher, I know that 

improving early learning provides more children the opportunity to reach their full 

potential, and puts more communities on the path to a better future. Yet, this Committee has only held four hearings or markups on Early Childhood Education since 

the 112th Congress. 

In comparison, as the chart shows, during that same time we’ve had 35 hearings 

and markups attacking labor unions and workers’ rights to collectively bargain for 

better wages and working conditions. 

There is a fine line between streamlining the economy and targeting workers’ 

rights. I believe this committee moved well past that line several hearings ago. 

Even when we debate federal wage and hour standards, we’re debating policies 

that would put financial stability even further out of reach for many workers. At 

no point since 2011, including in the 19 hearings and markups we’ve held on the 

subject, has this committee considered a single policy to raise workers’ pay or create 

a fair playing field for millions of hardworking people who are struggling to make 

ends meet. 

Workers do not have enough leverage in the workforce. The joint employment 

standard offers them the basic ability to hold both their employer and the joint employer liable for wage theft claims. This bill would strip workers of one of the few 

areas of leverage they have left. 

Victims of our two-tiered economy need this Committee to realign its priorities. 

As this chart shows, a recent study found that wages for the bottom half of earners were stagnant from 1980 to 2014. In this same time, income for the top 1 percent grew by 205 percent. I’ll say that again—205 percent. 

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6 

So I challenge my colleagues: What are we going to do for the bottom half of income earners? 

I have great respect for small businesses and I know the business owners here 

today will say that the joint employer standard causes them uncertainty. I am not 

indifferent to your concerns. 

But I, too, am worried about uncertainty. It’s the uncertainty felt by millions of 

American workers who do not know if they will be able to meet their basic expenses 

or provide for their children. 

That is the type of uncertainty that no one should have to live with. And it’s the 

uncertainty that this committee is obligated to address. Thank you all for being here 

today, and I look forward to your testimony. 

Chairman BYRNE. Thank you, Mr. Takano. 

I will now yield to my distinguished colleague from Michigan, 

Health, Employment, Labor, and Pensions Subcommittee Chairman Walberg for his brief opening remarks. 

Mr. Walberg. 

Chairman WALBERG. Thank you, Mr. Chairman. And good morning to everyone. I, too, would like to extend a warm welcome to our 

witnesses who have traveled from out of state to join us today. We 

appreciate you being here, and have had hearings on this issue in 

the past, and I am excited for this again. 

I listen to my friends and colleagues on the other side talk about 

the things that we should be doing that weren’t done when they 

were fully in control with the White House and both houses as 

well. So it is our time now to deal with things that I think make 

a difference in the real world of the American dream. This committee has been fighting to roll back the extreme joint employer 

scheme since it first took effect and for good reason. It’s a threat 

to jobs, entrepreneurship, and local employers across the country. 

We know this new joint employer standard has led to a whole 

host of real world consequences. Because that’s exactly what we’ve 

heard from business owners and their employees in each of our districts before this committee. We’ve all heard the voices of local job 

traders who fear they could lose control of their business to larger 

companies. One small business owner who described himself as, 

and I quote, ‘‘the living definition of the American dream,’’ warned 

the committee that he would -- and, again, quote, ‘‘virtually overnight become a manager of a large company.’’ 

We’ve also heard how this new standard has made it harder for 

small businesses to grow and create jobs in their communities. 

Kristie Arslan, the owner of a small gourmet popcorn shop, said 

she was considering opening five new locations through franchising 

but the joint employer threat made her expansion plans too risky. 

She decided she could only open one new store instead of five. This 

is just one concerning example of lost jobs and opportunity. 

So many hard-working entrepreneurs who took a risk to start 

their own business now find themselves in the sea of uncertainty. 

And it’s not just those in the franchising industry. Many small 

businesses and local vendors rely on contracts with larger companies, and they are concerned those contracts could soon be harder 

to come by. 

According to the American Action Forum, the joint employer 

scheme threatens 1.7 million jobs. To protect those jobs, we have 

to restore a commonsense definition of what it means to be an employer. 

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I’d like to remind some of our critics that the Save Local Business Act reflects the same straightforward joint employer test that 

workers and job creators relied on for decades. To be someone’s employer it makes perfect sense that you need to have actual, direct, 

and immediate control over terms and conditions of employment. 

This clear test does nothing to let employers off the hook for their 

obligations to their employees. What it does ensure -- what it does 

is ensure the actual employer is the one held responsible. And 

that’s the way it should be. 

It’s time to settle, once and for all, what constitutes a joint employer, not through arbitrary and misguided NLRB decisions and 

rulings by activist judges, but through legislation. This is obviously 

an area of labor law that is in desperate need of clarity as recognized by at least three of our colleagues on the other side of the 

aisle. This isn’t a Democrat verse Republican issue. 

The Save Local Business Act is about providing certainty for job 

creators in each and every one of our districts. It’s about keeping 

the American dream within reach. I look forward to today’s discussion. 

And, Mr. Chairman, I yield back. 

[The statement of Mr. Walberg follows:] 

Prepared Statement of Hon. Tim Walberg, Chairman, Subcommittee on 

Health, Employment, Labor and Pensions 

This committee has been fighting to roll back the extreme joint employer scheme 

since it first took effect, and for good reason. It’s a threat to jobs, entrepreneurship, 

and local employers across the country. 

We know this new joint employer standard has led to a whole host of real-world 

consequences, because that’s exactly what we’ve heard from business owners and 

their employees in each of our districts and before this committee. 

We’ve all heard the voices of local job creators who fear they could lose control 

of their businesses to larger companies. One small business owner, who described 

himself as the ‘‘living definition of the American Dream,’’ warned the committee 

that he would ‘‘virtually overnight become a manager for a large company.’’ 

We’ve also heard how this new standard has made it harder for small businesses 

to grow and create jobs in their communities. Kristie Arslan, the owner of a small 

gourmet popcorn shop, said she was considering opening five new locations through 

franchising, but the joint employer threat made her expansion plans too risky. She 

decided she could only open one new store instead of five. 

This is just one concerning example of lost jobs and opportunity. So many hardworking entrepreneurs, who took a risk to start their own business, now find themselves in a sea of uncertainty. And it’s not just those in the franchising industry. 

Many small businesses and local vendors rely on contracts with larger companies, 

and they are concerned those contracts could soon be harder to come by. 

According to the American Action Forum, the joint employer scheme threatens 1.7 

million jobs. To protect those jobs, we have to restore a commonsense definition of 

what it means to be an employer. 

I’d like to remind some of our critics that the Save Local Business Act reflects 

the same straightforward joint employer test that workers and job creators relied 

on for decades. 

To be someone’s employer, it makes perfect sense that you need to have ‘‘actual, 

direct, and immediate control’’ over terms and conditions of employment. This clear 

test does nothing to let employers off the hook for their obligations to their employees. What it does is ensure the actual employer is the one held responsible. And 

that’s the way it should be. 

It’s time to settle once and for all what constitutes a joint employer—not through 

arbitrary and misguided NLRB decisions and rulings by activist judges—but 

through legislation. This is obviously an area of labor law that is in desperate need 

of clarity. 

As recognized by at least three of our colleagues on the other side of the aisle, 

this isn’t a Democrat versus Republican issue. The Save Local Business Act is about 

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providing certainty for job creators in each and every one of our districts. It’s about 

keeping the American Dream within reach. 

Chairman BYRNE. Thank you, Chairman Walberg. 

I now yield to my distinguished colleague from New Jersey, Congressman Norcross, the ranking member pro tempore on the 

Health, Employment, Labor, and Pensions Subcommittee for his 

brief opening remarks. 

Mr. NORCROSS. Thank you, Chairmen Byrne and Walberg for 

holding this meeting today. And I would like to thank my, Ranking 

Member Mark Takano for what you do each and every day for 

working families, and certainly to the witnesses who you will be 

bringing your experiences to this issue. 

I’d like to start by offering my thoughts and prayers to the people of Texas and Florida and all those who have been impacted by 

the devastating storms over the last two weeks. There are 60,000 

what they call storm break workers in those two states restoring 

power, one of the most dangerous jobs that you can imagine. 

But today we’re here to consider a bill that attacks workers’ 

rights to fight for better wages and conditions. Employers have increasingly moved away from direct hiring, relying on leased employees, subcontractors, permatemps. There’s approximately 3 million Americans that are now employed by temporary staffing agencies, and one-fifth of all new jobs since 2009 have been through 

those temp agencies. 

Labor and employment laws have long held that there are multiple joint employers, when more than one entity controls the terms 

and conditions of employment. This bill would rig the National 

Labor Relations Act and the Fair Labor Standards Act to make it 

nearly impossible for workers to hold joint employers responsible 

for unfair labor practices, wage theft or others. 

Research shows that the fissuring of the workforce to increase 

outsourcing is already contributing to wage stagnation, and this 

bill would make that problem even worse. 

The joint employer standard that exists today started out in the 

common law standard as existed for hundreds of years. In America, 

that standard has existed through most of the 20th Century and 

exactly intended to do what it is doing. But when the NLRB narrowed that joint employer standard back in 1984, it made it easier 

for companies to evade this joint employer. So from 1935 to 1984 

it was the same standard. Hundreds of decisions were made based 

on that. And it wasn’t until 1984 that changed. 

In 2015, the NLRB considered a case where workers at Browning-Ferris, BFI, Recycling Plant wanted to organize a union. These 

workers were hired by the staffing agency Leadpoint to sort recycling materials at the BFI facility. But BFI capped their wages and 

assigned their workers’ shifts. BFI claimed it wasn’t the employer. 

But here’s the problem. If a worker had joined the union with 

Leadpoint as the only employer, then Leadpoint wouldn’t be able 

to bargain over anything without BFI’s permission. Workers 

wouldn’t even be able to bargain for better wages because the 

amount Leadpoint could pay was capped by BFI. The NLRB finding: that BFI was a joint employer. And this is critical to help raise 

wages. 

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So let’s look what happened at the table behind you and on the 

walls showing the disparity in those wages since the Leadpoint 

came into this equation. The wages of workers in nearly all the 

plants that have unions were from $19 to $30 an hour, plus 

healthcare, retirement savings. Leadpoint only made $12.50 an 

hour total package. Without being able to bargain with both of 

their employers, Leadpoint BFI workers and hundreds of thousands like them will never see their wages rise again. And this 

isn’t the only example. And we’ve seen these trends continue. 

Mr. Chairman, I’d ask for unanimous consent to introduce this 

document which lists three primary cases that the carpenters’ 

union has dealt with into the record. 

Chairman BYRNE. Without objection, so ordered. 

[The information follows:] 

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Mr. NORCROSS. Thank you. 

The right to join a union and collectively bargain helps workers 

raise wages. I’ve lived this. I’ve fought on behalf of workers to raise 

wages for almost two decades. This bill enables corporations to 

keep wages low by subcontracting out the work. They’re subcontracting their conscience to put profits over people. 

This bill even goes further. It amends the FLSA, the Fair Labor 

Standards Act, to prevent workers from holding employers accountable for wage theft, overtime violations or others. It immunizes the 

employers from child labor violations. Under this bill, all a company has to do is outsource control of just one essential term of employment, just one essential term of employment to its subcontracting. You could be -- scheduling. This bill relieves that company 

from any liability of wage theft for which it would be responsible. 

This is where I think the crux of what we’re discussing today 

comes down to. This bill is pushing for a solution in search of a 

problem when it claims this bill would help franchisees. The current joint employer standards do not hurt, do not hurt, franchisees 

in any way. There are approximately 800,000 franchisees in this 

country. The NLRB has never found one of them was a joint employer, 800,000, and not one decision to create a joint employer. It’s 

a remarkable fact. But it’s an important fact when we’re talking 

about what we’re trying to do here today. 

That’s because the board carefully draws a line between what a 

franchisor maintains its brand, like requiring training on how to 

prepare hamburgers, hot dogs or whatever else that the company 

produces. But they also do something now, the terms and conditions, wages, benefits, and hold that subcontractor to their exact 

standards. 

Mr. Chairman, I’m happy to work on legislation that would help 

small businesses and raise wages. This bill does neither. It empowers massive corporations and stagnant wages at a time when working families need relief. 

I’ll remind everybody it’s been a decade since a vote was taken 

on the minimum wage. It’s been eight years since they have received a raise. We should be lifting people up, not pushing wages 

down. 

While we disagree on the merits of the bill, I want to thank the 

chairman for following regular order, and I want to thank each of 

witnesses for traveling to Washington and look forward to your testimony. 

Thank you. 

[The statement of Mr. Norcross follows:] 

Prepared Statement of Hon. Donald Norcross, a Representative in Congress 

from the state of New Jersey 

Thank you Chairmen Byrne and Walberg for holding this hearing today. And I 

would like to thank my colleague, Ranking Member Mark Takano for all you do on 

behalf of working families. 

I would like to start by offering my thoughts and prayers to the people of Texas, 

Florida, and all the states impacted, particularly those who lost loved ones as well 

as those who remain displaced. I know I speak for my Democratic colleagues in stating that we stand ready to work with you to ensure that the affected states have 

the resources they need to recover and rebuild. 

Today we consider a bill that attacks workers’ rights to fight for better wages and 

conditions. Employers have increasingly moved away from direct hiring, relying on 

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leased employees, subcontractors, and perma-temps. Approximately 3 million Americans are now employed by temporary staffing agencies, and one fifth of all new jobs 

since 2009 have been through temp agencies. 

Labor and employment laws have long held workers have multiple, ‘‘joint employers’’ when more than one entity controls the terms and conditions of employment. 

This bill would rig the National Labor Relations Act and the Fair Labor Standards 

Act to make it nearly impossible for workers to hold joint employers responsible for 

unfair labor practices or wage theft. Research shows that the fissuring of the workforce through increased outsourcing is already contributing to wage stagnation, and 

this bill would make the problem even worse. 

The joint employer standard that exists today is based on a common law standard 

that has existed for hundreds of years. In America, the standard that existed 

through most of the twentieth century did exactly what it was intended to. But 

when the NLRB narrowed the joint employer standard under the NLRA in 1984 it 

made it easier for companies to evade joint employer status. 

In 2015, the National Labor Relations Board considered a case where workers at 

the Browning Ferris (BFI) recycling plant wanted to organize a union. These workers were hired by the staffing agency Leadpoint to sort recyclable materials at BFI’s 

facility, but BFI capped their wages and assigned the workers’ shifts. BFI claimed 

it wasn’t an employer, but here’s the problem: if the workers joined a union with 

Leadpoint as the only employer, then Leadpoint wouldn’t be able to bargain over 

anything without BFI’s permission. The workers wouldn’t even be able to bargain 

for better wages, because the amount Leadpoint could pay was capped by BFI. The 

NLRB’s finding that BFI was a joint employer is critical for these workers to raise 

their wages. 

[Referencing the chart:] Let’s look at what actually happened. This table compares 

what the subcontracted Leadpoint workers were making with the wages of workers 

at nearby plants that have unions. The union workers nearby make anywhere from 

$19 to $30 an hour, plus healthcare and retirement savings. The Leadpoint workers 

only make $12.50 an hour with no wages and benefits. Without being able to bargain with both of their employers, the Leadpoint/BFI workers, and hundreds of 

thousands like them, will never see their wages rise. And this isn’t the only example 

- we have seen similar trends in the telecom and construction industries. 

Mr. Chairman, I ask unanimous consent to introduce this document into the 

record. 

The right to join a union and collectively bargain helps workers raise wages. I’ve 

lived this—I fought on behalf of workers to raise wages for over two decades. This 

bill enables corporations to keep wages low by subcontracting out their work. They 

are subcontracting their consciences to put profits over people. 

This bill goes even further. It amends the Fair Labor Standards Act to prevent 

workers from holding employers accountable for wage theft or overtime violations. 

It even immunizes employers from child labor violations. Under this bill, all a company has to do is outsource control over just one essential term of employment to 

its subcontractors—say scheduling. The bill then relieves the company of any liability for any wage theft for which it may be responsible. Workers and businesses want 

stability and predictability. Instead we are giving them chaos. 

The Majority [alternative: This bill] is pushing a solution in search of a problem 

when it claims that this bill would help franchises. The current joint employment 

standards do not hurt franchises in any way. There are around 800,000 franchisees 

in America and the NLRB has never found that one of them was a joint employer.1 

That’s because the Board carefully draws a line between when a franchisor maintains its brand—like requiring training on how to prepare burgers—and when a 

franchisor governs terms of employment, like wages. This bill would leave countless 

hardworking Americans without a voice in their workplace at a time when Congress 

should be helping to lift up workers by raising wages and improving workplace conditions. 

Mr. Chairman, I’m happy to work on legislation that would help small businesses 

and raise wages. This bill does neither: it empowers massive corporations and stagnates wages at a time when working families need relief. We should be lifting people up, not pushing wages down. 

While we disagree about the merits of this bill, I want to thank the Chairman 

for following regular order. I also want to thank each of the witnesses for traveling 

to Washington, DC, and taking the time to appear here today. 

I yield back. 

https://www.cnbc.com/2016/01/20/us-franchises-set-to-grow-in-2016-report.html 

Chairman BYRNE. Thank you, Mr. Norcross. 

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Pursuant to committee Rule 7(c), all subcommittee members will 

be permitted to submit written statements to be included in the 

permanent hearing record. Without objection, the hearing record 

will remain open for 14 days to allow statements, questions for the 

record, and other extraneous material referenced during the hearing to be submitted in the official hearing record. 

Now, it’s my pleasure to introduce our distinguished panel of witnesses. 

Our first witness is Mr. Granger MacDonald. He is the CEO of 

MacDonald Companies, a group of companies specializing in developing, building, and managing multi-family neighborhoods in 

Texas, and is testifying on behalf of the National Association of 

Home Builders. 

And, Mr. MacDonald, let me just say on behalf of all of us, we’re 

all praying for the state of Texas. We appreciate you being here. 

Now I recognize Representative Lewis to introduce our next witness. 

Mr. LEWIS. Thank you, Mr. Chairman, for holding this hearing 

and for introducing this very important piece of legislation to provide clarity and relief to local businesses and job creators across 

this country who are threatened by this joint employer scheme. 

It is my pleasure to introduce a local business owner from my 

state of Minnesota, Ms. Tamara Kennedy who will be testifying on 

behalf of the International Franchise Association. She began her 

career as a secretary and worked her way up to owner by working 

nights in the restaurants while studying accounting and managing 

the books for a previous owner. 

Ms. Kennedy now owns and operates nine Taco John’s franchises, eight of them in the Twin Cities area. She epitomizes the 

American dream of work, investment, and risk. But America’s 

economy’s tolerance for risk is not unlimited. You know, her favorite part of the job is getting to teach young people how to be good 

employees and good teammates, an important role franchises play 

across this nation. 

Ms. Kennedy is serving her second year as a member of the 

International Franchise Association’s convention committee and 

will be soon be taking a seat on the IFA board of directors. I look 

forward to hearing about her experiences, and I thank her for joining us today. 

Chairman BYRNE. Thank you, Mr. Lewis. I will now continue 

with this mornings’ introductions. 

Mr. Michael Rubin is a partner at Altshuler Berzon LLP, in San 

Francisco, California. Welcome sir. 

Mr. Zachary Fasman is a partner in the labor and employment 

law department at Proskauer Rose LLP, in New York City. Distinguished panel. 

I now ask our witnesses to raise your right hand. 

Do you solemnly swear or affirm that the testimony you are 

about to give will be the truth, the whole truth, and nothing but 

the truth? 

Let the record reflect the witnesses answered in the affirmative. 

Before I recognize each of you to provide your testimony, let me 

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utes to present your testimony. When you begin, the light in front 

of you will turn green. 

When one minute is left, the light will turn yellow. When your 

time has expired, the light will turn red. 

At that point, I will ask to you wrap up your remarks as best 

as you are able. 

After everyone has testified, members will each have five minutes to ask questions of the panel. 

Now, I am not, like, really harsh about the lights. But sometimes 

people go a little bit over. We have a lot of members here that want 

to ask questions. And only so much time for you and for them. So 

if I push you a little bit, please don’t take it personally. It’s because 

we’re trying to keep everything moving. 

So when that light turns yellow please start getting to the point 

where you’re winding up. Okay. Are we all clear on that? Good. 

Also, before you testify, just as Mr. MacDonald is doing, press 

the button for your microphone or we won’t hear you good Mr. MacDonald thank you look forward to your testimony. 

STATEMENT OF GRANGER MACDONALD, CEO, MACDONALD 

COMPANIES, KERRVILLE, TEXAS, TESTIFYING ON BEHALF 

OF THE NATIONAL ASSOCIATION OF HOME BUILDERS 

Mr. MACDONALD. Thank you, Mr. Chairman appreciate being 

here today. 

My business, MacDonald Companies, specializes in developing affordable multi-family housing across Texas. We currently own and 

manage 4571 units in 41 different apartment communities in 25 

cities. We directly employ 131 workers from construction supervisors, to property managers, to maintenance and repair staff, 

many of whom are full-time, salaried individuals. 

Beyond our regular staff, MacDonald Companies contracts with 

80 other companies and specialty trades to perform a range of services across all of our properties including HVAC work, piling, 

drywall, et cetera. This type of arrangement is not unique to the 

entire construction industry. It’s made up of a system of building 

contractors and subcontractors who have been this together. For 

the most builders they don’t have enough work to hire someone full 

time to just do tile work for example. I might only need a drywaller 

for a few weeks each year. 

These numerous specialized task require a complete project we 

contract with other small companies out of necessity. This is why 

I’m very concerned about the ongoing ambiguity over what constitutes a joint employer. A builder can now be considered a joint 

employer if he has indirect or potentially ability to exercise control 

over the workers’ subcontractors the question of what can deemed 

indirect control and when it legally constitutes joint employment 

has been left to an open ended situation by the NLRB. This threatens to upend the foundation of the entire industry. 

For example, we’ll schedule a painter or an electrician to come 

to a jobsite at a certain time. Does that trigger a finding of joint 

employment? Do I have indirect control if I ask a contractor to 

bring on extra staff to make up for delays? One might think that 

an indirect or potential control over just one factor like scheduling 

would not justify a finding of joint employment. But because of the 

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indirect test, it’s so vague, the NLRB has not ruled on that possibility. And there is nothing stopping the courts from ruling on the 

basis of just one factor. 

Over the last three weeks, I’ve been overseeing cleanup and reconstruction efforts at some of our buildings in the wake of Hurricane Harvey’s historic devastation. The process of rebuilding from 

a natural disaster is chaotic and time lines are anything about predictable. 

I have contractors and subcontractors coming in and out of our 

properties round the clock right now. I may ask a contractor to 

bring on more staff to finish up drywalling that has fallen behind 

so that the next stage of workers can get started or tell the cabinet 

installer that he can’t come as planned because the replacement 

floor tiles have not been set because of lingering humidity because 

of the storm damage. Can these acts meet the test for indirect control? The expanded joint employer test provides no clarity. 

My focus is on getting families back to their homes. We have endured and rebuilt from bad storms before, and we’re doing it again. 

But this time is with the added worry of whether my company will 

be held liable for the practices of contractors, third-party vendors, 

and suppliers that we’ve hired to help with this important job over 

whom we have no direct control. 

The reality is that the line that once clearly separated two employers is so blurry that neither I nor others in the industry can 

see where it lies. The scope of the liability will only grow for builders as courts explore and expand the limits of the new standard. 

Exposed to unlimited and unpredictable joint employment liability, 

small businesses will find it increasingly challenging to comply 

and, therefore, compete. This is true for residential building firms, 

the majority of which have less than ten employees, as well as specialty trades. 

With less competition among small firms, construction costs, and 

subsequently home prices, will rise, particularly troubling for those 

of us who are in the business of providing affordable housing. 

The bipartisan Save Local Business Act offers a commonsense solution to the ambiguity created by the Browning-Ferris decision by 

affirming that a company may be considered a joint employer of a 

worker only if it directly, actually, and immediately exercises significant control over the primary elements of employment. 

This is reasonable. I should be held accountable for my employees but not for those of another company. Codifying the definition 

will provide the legal certainty every business owner needs. I urge 

the Committee to take swift action to advance the Save Local Business Act. 

Thank you. 

[The statement of Mr. MacDonald follows:] 

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Chairman BYRNE. Thank you, Mr. MacDonald. 

Ms. Kennedy, you are recognized for five minutes. 

STATEMENT OF TAMRA KENNEDY, PRESIDENT, TWIN CITY 

T.J.’S, INC. ROSEVILLE, MN, TESTIFYING ON BEHALF OF THE 

INTERNATIONAL FRANCHISE ASSOCIATION 

Ms. KENNEDY. Chairman Byrne, Chairman Walberg, Ranking 

Member Takano, Ranking Member Norcross, and distinguished 

members of the subcommittees, good morning. My name is Tamara 

Kennedy, and I’m the president of Twin Cities’ Taco John’s, multiunit franchisee based in Minnesota. I’m honored here today to 

speak here on behalf of small businesses throughout the nation, 

and I thank you for your invitation. 

I want to start by recognizing that all of our prayers and 

thoughts are with the people of Florida, Alabama, Georgia, South 

Carolina, Texas, Louisiana, all of whom have been affected by the 

hurricanes of Irma and Harvey. 

Today I’m representing the Coalition to Save Local Businesses 

and its thousands of members who are supportive of the Save Local 

Business Act. I’m appearing before you today with over 400 franchise brand leaders coming around Capitol Hill urging their Representatives and Senators to take close look at this legislation. We 

consider H.R. 3441 the most important federal legislation in franchising in over a generation. 

Mr. Chairman, I got my start working as a secretary for a Taco 

John’s franchisee. It took me 17 years to realize my dream of owning my own business, and in 1999, when my employer retired, I 

bought the restaurants. Today my organization operates nine locations, eight in Minnesota and one in central Iowa. My business has 

overcome many challenges, including the recession, but we have 

stayed the course because I believe our company has the potential 

for growth, should the regulatory environment allow us the certainty and the flexibility to do so. 

Countless people in the franchisee industry start out in entrylevel positions like mine, as busboys, line cooks or cashiers, or as 

secretaries, working towards their dream of someday owning their 

own business and being their own business and being their own 

boss. The franchise structure has created that path. 

As a local business owner, I am very fortunate to have the privilege of providing jobs in our neighborhoods. My company’s values 

really are about giving people a place to earning a living and learn 

skills at the same time. It’s the greatest honor a local business can 

have to pay forward the opportunity to learn how to be good employees, good teammates, and eventually great leaders in their own 

right. I’m here today to encourage this committee and this Congress to act on the legislative solution to address the joint employer 

problem pending before the subcommittees. 

It is important that you know how much I love my brand and 

that partnership that I have with Taco John’s. If you’ve ever heard 

the phrase or used the phrase taco Tuesday, I’m proud to say 

you’re using a Taco John’s trademark. But now, after two years operated under the expanded joint employer standard, the impact of 

my business is clear. 

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Joint employee means I must pay more to run my business and 

earn less in return. Franchisors, including mine, have been compelled to consider the potential liability risk of the new joint employer standard that the National Labor Relations Board has imposed. Changing the rules’ language with less clear, more widely 

interpreted definitions of joint employer by adding words like indirect and even reserved or unexercised control, opens up very real 

concerns. 

Some examples: My franchisor used to provide employee management products as options for franchisees. Basic but essential tools 

like job descriptions, performance reviews, and employee handbooks, and recruiting tools like banners, fliers, and ad copy, used 

to be available. But due to expanded joint employment liability, the 

company no longer provides most of these tools. 

Now I must hire an outside attorney to write an employee hand- book. That employee handbook cost me $9,000. Just this year we 

no longer have access to a branded job application form from the 

franchisor. I must create my own application or use an off-theshelf, non-branded form. 

The reality is that joint employer is impacting my ability to recruit employees. Quite simply, we want and need employees to consider our business when they’re searching for a job. It could not be 

more important today to have a powerful, creative, systemwide set 

of employment tools. I don’t blame our brand for some of these 

changes, because I know they’re watching what’s at stake for everyone. 

Our brands are coming under attack for involvement in the hiring process which some believe indicates a direct relationship with 

my employees. Those of us running our businesses know that’s simply not the case. My view and my brand’s view is that my employees are my employees alone. My brand’s role is to provide me with 

tools and never to exert control over my employees. 

In its August 2015 decision to expand the joint employer, the 

NLRB removed the clear understanding from a business relationship and the now the industry is justifiably struggling with this 

new legal landscape. 

Chairman Byrne, Chairman Walberg, on behalf of the Coalition 

to Save Local Businesses, thank you so much for introducing the 

Save Local Business Act. The expanded joint employer standard is 

simply not working. It’s time we provide some security to local 

business owners. Thank you. 

[The statement of Ms. Kennedy follows:] 

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Chairman BYRNE. Thank you, Ms. Kennedy. 

Mr. Rubin, you’re recognized for five minutes. 

STATEMENT OF MICHAEL RUBIN, PARTNER, ALTSHULER 

BERZON LLP, SAN FRANCISCO, CA 

Mr. RUBIN. Thank you. Let me begin by thanking Chairmen 

Byrne and Walberg, and Ranking Members Norcross and Takano 

for this opportunity to testify about the impacts of the Save Local 

Business Act. I’ve been representing low-wage workers for more than 35 years. 

My clients include janitors; security guards; warehouse, garment, 

fast food workers; and others. For these workers, and for many 

small businesses operating in a low-wage economy, H.R. 3441 will 

have disastrous consequences. 

The bill purports to redefine the term joint employer under the 

NLRA and FLSA. But its practical effect would be to completely 

eliminate joint employer responsibility under those statutes. The 

proposed definition narrows the NLRA’s common law standard and 

the FLSA’s direct or indirect suffer or permit standard so dramatically that no company could meet the definition of joint employer 

once it contracts out any direct control over its workers’ employment. 

The bill exempts from joint employer responsibility any company 

that does not exercise direct and significant control over all essential terms and conditions of its workers’ employment. That means 

once an employer has delegated any significant control over any 

terms and conditions of its workers’ employment, it has ceased exercising direct control over those terms and conditions and is no 

longer a potential joint employer. 

Why does that matter? In a low-wage economy, wage and hour 

violations, discrimination, and other unlawful conduct are rampant. 

All too often, though, the injured workers have no real ability to 

enforce their rights, even in the face of flagrant violations, especially when their direct employer is an under-capitalized labor 

services subcontractor. 

Mr. RUBIN. In case after case, we have seen law-violating subcontractors, whether they supply garment workers in Los Angeles, 

janitors in Texas, or warehouse workers in California or Illinois, 

simply declare bankruptcy in the face of a court judgment for backpay or other relief, while their owners or their owners’ relatives or 

business partners later incorporate under another name to carry on 

the company’s same business, leaving the judgments unsatisfied. 

The proposed definition of joint employer would leave without 

remedy the workers most in need of statutory protection, the atwill, nonunion employees who are most susceptible to exploitation. 

It would also leave small business owners in the difficult position 

of being solely responsible for labor law compliance and collective 

bargaining even when they lack sufficient authority and control to 

meet that responsibility. The problem faced by small businesses is 

not that a court might impose joint employer liability on the company that shares their control over the workforce. 

The problem is the small businesses’ economic dependence on 

that larger company may leave it no choice but to accept that 

shared control without correspondingly shared responsibility. 

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The proposed bill radically redefines joint employment under the 

FLSA and NLRA, abandoning the statutory directly or indirectly 

suffer-or-permit standard that has been key to effective FLSA enforcement since 1935, and rejecting the common law of agencybased NLRA standard. Under the proposed bill, it would be easier 

to prove a company’s responsibility for wrongful acts committed by 

an employee against a stranger under the traditional common law 

master-servant standard than to prove that company’s own responsibility for wage and hour violations committed against its own employees. This turns the purposes of the FLSA and the common law 

standard on its head. 

There’s no need for these changes. Any lead company that does 

not want to be responsible for bargaining over workplace conditions 

it controls can simply restructure its relationships to give its suppliers greater independence in controlling wages, hours, and working conditions. 

In my law practice, I’ve seen the destructive impacts of the fissured economy and the critical need for meaningful labor enforcement in many industries. Let me briefly share one example as 

mentioned by Representative Takano. 

In a case we settled a few years ago in southern California, hundreds of warehouse workers were employed in four warehouses, 

loading and unloading trucks for deliveries to Walmart distribution 

centers. Walmart owned the warehouses and their contents. It contracted with a subsidiary of Snyder Logistics to operate the warehouses, and Snyder, in turn, retained two labor services contractors 

to hire the workers. By contract, all responsibility for legal compliance rested with the contractors, yet Walmart and Snyder retained 

and exercised control over almost every aspect of those workers’ 

employment. We ended up settling that case for $22.7 million. Class members 

got tens of thousands of dollars in recovery and significant injunctive relief that stopped those violations, that increased the wages 

and allowed health benefits for the first time for those workers only 

because the courts made preliminary findings of -- 

Chairman BYRNE. Mr. Rubin, you’re beginning to run over. Can 

you wind up, please? 

Mr. RUBIN. Absolutely. 

The proposed bill would have required a completely different result in that case. None of those defendants would have been a joint 

employer under H.R. 3441. The new narrow definition would have 

left those workers and millions like them almost completely without recourse. 

I’d be pleased to answer your questions. 

[The statement of Mr. Rubin follows:] 

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Chairman BYRNE. Thank you, Mr. Rubin. 

Mr. Fasman, you’re recognized for five minutes. 

STATEMENT OF ZACHARY D. FASMAN, PARTNER, PROSKAUER 

ROSE LLP, NEW YORK, NY 

Mr. FASMAN. Chairman Byrne, Chairman Walberg, Ranking 

Member Takano, Ranking Member Norcross, and members of the 

committee, thank you for inviting me to testify today. I’d like to address my remarks to the legal issues that are before this committee. 

As this committee knows, beginning in 1984, the National Labor 

Relations Board and the courts instituted a standard in which the 

courts determined whether two separate entities were joint employers by applying exactly the standard set forth in this bill. The accepted test was, and should be, whether the alleged joint employers’ control over employment issues was direct and immediate. The 

NLRB and the courts properly distinguished direct and immediate 

control from situations where the alleged joint employers’ supervision was limited and routine. 

And I want to emphasize for the committee this is not a new 

standard. This is the traditional standard that was followed by the 

NLRB and the courts in hundreds of cases for more than 30 years. 

This bill will simply restore the law to where it was before the 

NLRB’s decision in Browning-Ferris. Now, why is this important? 

The key for me is that the traditional standard is based upon facts, 

the actual conduct of the parties, as opposed to hypothetical, afterthe-fact legal conclusions about indirect or potential but unused authority. The traditional standard affords stability and predictability 

by asking a factual question: Who actually makes employment decisions? 

I want to emphasize that this standard does not prevent collective bargaining. It allows collective bargaining between unions and 

the employer that actually hires, fires, disciplines, supervises, and 

directs the employees. In Browning-Ferris, the NLRB abandoned 

the facts and actual conduct and created a new test based upon 

whether the alleged joint employer has the potential to control aspects of the workplace either directly or indirectly, whatever that 

means, even though it’s never exercised that authority. 

In other words, the Browning-Ferris test is not based upon the 

parties’ actual conduct but turns on after-the-fact legal conclusions 

about who has what potential authority. That test is not based 

upon the common law. Indeed, in my view, it is no test at all. 

As the dissent in Browning-Ferris observed, virtually every business that subcontracts part of its operations falls into this category. 

Contracting parties will always have the potential economic control 

over the relationship, even though they’ve never exercised it. And 

that’s the key problem with Browning-Ferris. It makes virtually 

every business that subcontracts any of its operations into a joint 

employer. 

This standards negates freedom of contract and allows imposition 

of joint employer liability after the fact through administrative determinations about the level of potential or indirect control retained but never exercised by the joint employer. It destroys any 

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level of predictability on thousands of vital commercial relationships. 

For me, as someone who’s negotiated many contracts, the justification of this standard, because it is allegedly necessary for 

meaningful collective bargaining, makes no sense. In fact, to me, 

it’s just the opposite. Adding in an employer that has potentially 

conflicting interests that is a third employer or second employer 

into the bargaining sessions will make it much more difficult to 

reach agreements, not easier. And I can tell you from experience 

it’s difficult to reach agreements between one union and one employer, let alone multiple employers who have conflicting interests. 

Applying such a broad definition of joint employer also undermines the Taft-Hartley Act where Congress confined labor disputes 

to a dispute between the primary employer and outlawed secondary 

boycotts, outlawed secondary picketing and involvement of a broader series of employers. A joint employer could easily be -- under 

this standard, under the Browning-Ferris standard, might easily be 

considered sufficiently related to the primary employer to allow 

picketing at the joint employer’s facilities. And that’s contrary to 

Taft-Hartley. 

A slightly different question is raised under the Fair Labor 

Standards Act which does have different definitions. But under 

that act there’s a crying need for a definition of joint employer. As 

I’ve said in my written comments, there were 9,000 Fair Labor 

Standards Act lawsuits filed in 2016 alone. That’s not 9,000 total 

in the courts. That’s 9,000 new lawsuits. And there has never been 

a clear definition of joint employment under that act. 

There is a crying need for a clear definition. And my colleague 

on the panel has cited a case called Salinas v. Commercial Interiors 

where the Fourth Circuit, in 2017, goes through all the different 

standards, itemizes them, comes up with a clearly unworkable new 

test. That goes on all the time. And it’s time for Congress to -- 

Chairman BYRNE. Mr. Fasman, you’re going to have to wind up 

too. 

Mr. FASMAN. Let’s get a definition that works. And, in my view, 

this one would work under that act. 

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Chairman BYRNE. Thank you, Mr. Fasman. I’m a lawyer. We just 

can’t help ourselves. We can’t stick to the timeframe. I understand 

it. But I do appreciate all your testimony. That was excellent for 

all of us. 

Now we get to the time period where it’s question-and-answer 

time from the members of the committee. Let me remind the members of the subcommittees and the witnesses, each member gets 

five minutes. So however many people he asks, it’s just five minutes for that one member. And we’re going to try to stick to that 

as close as we can, because we have a lot of members here today. 

We’ll start off our questioning from the distinguished chairwoman of the committee, Dr. Foxx from the great state of North 

Carolina. 

Dr. Foxx, five minutes. 

Mrs. Foxx. Thank you, very much, Mr. Chairman. I want to 

thank all of our members for being here and certainly thank our 

panelists for being here today. Their testimony has been great. 

Mr. Fasman, I want to start with you, because I think you gave 

such a wonderful statement at the beginning about the traditional 

standard being based on facts. You know, I think that’s so important that we continue to talk about that, and that the BrowningFerris decision based on potential authority and on intent, not action. I think too many times in our culture these days there is this 

decision to judge people on intent and not action. And I thank you 

so much for making this so succinct. 

It’s been suggested that the BFI standard is not as broad as 

some claim and that business owners should not worry about it. Do 

you agree? 

Mr. FASMAN. Chairwoman Foxx, thank you for your comments. 

I don’t agree. I think that the potential in this standard, to use the 

standard’s own terms, is amazingly broad. The potential to control 

a relationship, I think basing a decision upon that, sweeps everything into the standard. So I would not agree with that. 

Mrs. FOXX. So your concern is that the potential application of 

this expanded standard is far reaching. Is there anything in BFI 

that serves to limit its application so business owners we have here 

today should not be concerned? And, on the other hand, would the 

joint employer standard in Save Local Business Act be limited in 

such a way as to assuage business owners’ concerns? 

Mr. FASMAN. Well, I think there is nothing in BFI that suggests 

a limitation. And that, indeed, is the problem, as the dissent observed in BFI. And the standard in this bill restores the law to 

what it was and the law that we’ve lived under for 30-plus years. 

So I think that people should take some comfort in that. There are 

many, many decisions applying the standard that’s in this bill. 

Mrs. FOXX. Thank you very much. 

Mr. MacDonald, my husband and I were in the construction business for many years several times in our lives. And we did a lot 

of subcontracting with people. So I understand a little bit about 

your business. 

Does your company have any way to control all the actions of 

your vendors or subcontractors that you could be held liable for 

under expanding joint employer definitions? 

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Mr. MACDONALD. Well, thank you very much. And I’m glad that 

you got out of the business and found good work. It was a good 

move. 

You know, under Browning-Ferris, it’s so overly broad, and it 

doesn’t provide employers with clarity so we know where we’re 

headed. We all agree that there needs to be some common sense 

guidelines. And that’s what we’re not seeing currently. Essentially, 

we’re working under a scenario where you’ll know it when you see 

it if it’s bad. I mean, which doesn’t give anyone any certainty as 

to what’s going forward or where we’re headed with all this. 

And we don’t have the opportunity to direct every single task 

with our subcontractors. We don’t set the price. We don’t do anything like that. And we certainly don’t do any more than just 

scheduling our folks when we need a task done, which is -- you 

know, this morning at breakfast I got a menu. I selected something. The gentleman brought it to me. I asked him to hurry. You 

know, was I scheduling him? He didn’t bring me what he wanted 

to bring me for breakfast. You know, it seems facetious, but it’s 

really the same thing. 

Mrs. FOXX. Right. 

Well, Ms. Kennedy, I would like to know if you would have been 

able to have gained the same level of experience as an employer 

without the franchise help? And would you have been as eager to 

have become a franchise owner yourself if you knew the franchiser 

would have had such a level of control over your business? 

Ms. KENNEDY. Thank you. No. There’s no way that I could have 

gained that experience without following the path that I did 

through the course of franchising. It is one of the true quintessential American products, franchising is. It gives us the opportunity 

to learn all of the many important parts of running a business but 

gives us the security of knowing that we’re working with a proven 

process. So it limits the risk that we take when we go into business 

for yourself. 

It’s important to remember that same path that I followed, I 

hope more people can. And that’s what we’re risking here if we 

don’t get this fixed. 

Mrs. FOXX. Thank you, Mr. Chairman. 

Thank you, lady and gentlemen. 

Chairman BYRNE. Thank you, Madam Chairwoman. The chair 

now recognizes the ranking member of the full committee, the gentleman from Virginia, Mr. Scott, for five minutes. 

Mr. SCOTT. Thank you, Mr. Chairman. 

Mr. Rubin, you have a copy of the bill in front of you? 

Mr. RUBIN. Yes. 

Mr. SCOTT. On page 2, line 8, it says a person may be considered 

a joint employer ‘‘only if such person directly,’’ then goes down to 

exercises essential control over the central terms of employment, 

including hiring/firing, determining rates of pay and benefits, dayto-day supervision, assigning work schedules, positions and tasks 

and administering discipline. To be called a joint employer, you 

would have to do all of those. 

Mr. RUBIN. Under the language of the bill, you have to do all of 

those, which is why -- 

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Mr. SCOTT. So if you do everything, if you hire, fire, determine 

rates of pay, but you don’t assign individual work schedules, you 

would not be a joint employer under this definition. Is that right? 

Mr. RUBIN. That is right. 

Mr. SCOTT. Now, exactly how would your right to negotiate 

wages as a union work if the person who hires, fires, and determines rates of pay and benefits is not at the table? 

Mr. RUBIN. You can’t. And contrary to Mr. Fasman’s testimony, 

and as the Board made clear in Browning-Ferris, and later in Miller and Anderson, it’s only if the companies that can actually control the essential terms and conditions are at the table that you 

can have meaningful bargaining. 

Mr. SCOTT. Now, in Ms. Kennedy’s testimony, she said that the 

franchisor used to have employee handbooks, a job application 

form, and helping recruiting employees. Would anybody doing that 

ever be considered a joint employer? 

Mr. RUBIN. Well, in the Freshii case, the advice memorandum by 

the Boards’ general counsel made clear that a franchisor would not 

be liable for making available handbooks and other materials as 

long as they’re optional. The circumstances that Ms. Kennedy described would not, under the Board’s current view, trigger joint employer liability, which is why, of the 800,000 franchisees, none have 

ever been found in a joint employer relationship. 

Mr. SCOTT. Ms. Kennedy, in light of the fact that of 800,000 

franchisees, none of the franchisors have ever been held joint employment. And I’m trying to find out what the problem is that you 

are articulating. Did lawyers help prepare your testimony and interpret the laws, give you advice on that? 

Ms. KENNEDY. No. 

Mr. SCOTT. Who prepared your testimony? 

Ms. KENNEDY. I did. 

Mr. SCOTT. Now, why did you think that -- where did you get the 

idea that a franchisor might become a joint employer? 

Ms. KENNEDY. We are taking a look at all of the many written 

articles that are out there in not only the franchise space but in 

all the business magazines, and trying to understand how our relationship is changing right now with our franchisor, and trying to 

determine where we’re going to head as a partnership. 

Mr. SCOTT. But are lawyers helping you get through that? 

Ms. KENNEDY. No. 

Mr. SCOTT. Okay. Well, I think that most of the lawyers are suggesting, as Mr. Rubin said, that there’s 800,000 franchisees, and 

not a single franchisor has ever been declared a joint employer. 

And so we’re trying to find out what the fear is. If they are joint 

employers, they will be responsible for what they did. If they are 

controlling the wages, then they would have to be subject to the 

NLRB. 

Mr. Rubin, if there is an OSHA violation created by the 

franchisor, would the franchisor be a joint employer under present 

law or under the bill? 

Mr. RUBIN. Under the present law governing OSHA, yes. Under 

the bill, absolutely not. Because under the bill there is no joint employer anymore. 

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Mr. SCOTT. And if there is a wage -- if there’s a failure to pay 

overtime directed by the franchisor, under present law would they 

be a joint employer for that purpose? 

Mr. RUBIN. Yes. And there are many examples of that. But under 

the current bill, they would not be a joint employer because there 

are no more joint employers who control every single term and condition directly and actually. 

Mr. SCOTT. And how does the bill return us to the traditional definition of employer? 

Mr. RUBIN. It doesn’t at all. The traditional definition of employer, under the FLSA, is directly or indirectly suffers or permit. 

It’s a completely different standard, the most worker-protective 

standard ever enacted by this Congress. 

And under the National Labor Relations Act, the Supreme Court 

said you return to the common law standard. So if you actually 

read the Browning-Ferris opinion, you see them extensively quote 

from the Restatement of Agency, 1933, 1958, which states the legal 

standard, which the Board adhered to. 

And the test in Browning-Ferris, despite what I’m hearing about 

perspective, and indirect, is very clearly stated in the context of collective bargaining. If they are -- they have to be employers within 

the meaning of the common law, which includes direct and indirect 

and if they share or codetermine those matters governing the essential terms and conditions of employment. 

That is the standard that has always been applied. That goes 

back to the beginning of the National Labor Relations Act. That is 

the standard that should continue. And, of course, these are factbased inquiries. 

Chairman BYRNE. Mr. Rubin, we’re going to have to wind up. 

Mr. RUBIN. I’ll end it there. 

Chairman BYRNE. Thank you, Mr. Scott. 

Mr. BYRNE. Thank you, Mr. Scott. The chair now recognizes the 

chair of the Subcommittee on Health, Employment, Labor, and 

Pensions, Mr. Walberg, for five minutes. 

Mr. WALBERG. Thank you, Mr. Chairman, and thanks again to 

the witnesses. 

Ms. Kennedy, thanks for grabbing the whiplash by the tail of 

franchisee and going for the American dream, as you have. And we 

applaud you and congratulate you. 

You spoke about receiving less assistance and help from your 

franchisor due the expanding joint employer standards and the fear 

that these programs will create unintended joint employer liability. 

Could you further explain why this type of assistance is so critical to the franchisee and to all business owners, and especially, 

first time business owners who are in the franchise system? 

Ms. KENNEDY. Thank you. I’ll be glad to. 

What’s important to remember is that at the heart of franchising 

is someone’s idea, I make really good tacos. But that doesn’t make 

me an expert in legal matters. It doesn’t make me an expert in construction. It doesn’t make me an expert in all of the things that it 

takes to run a business. 

When you join a franchise, when you choose to partner with a 

franchise, you get some of the support in those areas that you’re 

looking to learn more about. It lessens the risks and it creates the 

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opportunity to grow faster, become more profitable, and put more 

people to work. 

It is, for me, probably one of the most important parts of this is 

to try to understand that my employees are my employees. And I 

get to pick them. I get to watch them grow and move on and, 

through our company, on to better things. And my employer doesn’t 

have any role in that employment process other than to supply me 

with what I desperately need right now, which is really good recruiting tools and training tools to keep people growing into what 

they’re going to become. 

And where we’re at now is, does that make them potentially indirectly responsible for part of the employment process. 

Mr. WALBERG. We’ll go on with that. What problems may develop 

and be created in an expanding joint employer standard that isn’t 

reined in? What additional problems would you see? 

Ms. KENNEDY. Goodness. Trying to wait to see whether or not we 

want to use the court system to decide whether or not there was 

indirect control, whether or not there is reserved and unexercised 

control, means that I’m not going to be able to open restaurants as 

often as I’d like to and at a speed that I think that I could, because 

I’m not sure whether or not I’m eventually not really going to be 

an owner. 

If I’m in some way just a middle manager because my franchisor 

is somehow indirectly responsible for my employees. And that’s, 

that’s concerning. 

Mr. WALBERG. Thank you. Mr. Fasman, your written testimony 

noted that bringing two or more alleged joint employers to the bargaining table in a union contract negotiation may result in conflicts 

of interest between the two employers. 

Do you think this would result in better deals for employees, and 

would it promote labor peace? 

Mr. FASMAN. Chairman Walberg, I don’t think it would promote 

labor peace at all, and I don’t think it would promote better deals 

for employees. I don’t think it would promote deals. Because you 

would have two employers with differing view points pointing fingers at each other saying, ‘‘It’s your responsibility. No, it’s your responsibility.’’ And nothing is likely to get done in those circumstances. 

So, no, I don’t think it’s a better deal at all. 

Mr. WALBERG. Okay. Mr. MacDonald, you spoke about shortages 

of workers in especially construction trades. And we hear about 

that all over our districts, all across the country. 

It seems to me that one of the driving forces to get workers into 

specialty trades would be the potential to own their own business 

some day after they learn the process. 

Do you think the expanding joint employment standard could 

take away that incentive and how might this impact the construction industry? 

Mr. MACDONALD. Well, it would be an extreme negative impact. 

You know, most of our smaller subcontractors now are the ones 

that do the majority of the work. They are people that have under 

15 employees total in their shop. They are the great American 

dream. They are the guys who started off as a journeyman and 

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made their way to a master status and then started their own companies. And with their own sweat and blood, have gotten it done. 

And they’re not out trying to do anything but a good job. Most 

of the people in the construction industry, the homeowners that I 

represent are just like myself. I started off in a pickup truck with 

a toolbox. And we’ve built a very good company. We’ve been blessed 

and we’ve gotten a lot done. And we’ve made a lot of good, safe affordable housing for Americans because of it. 

With the storm that we’ve had in Texas and it’s occurred in Florida, we’re going to be short in Texas alone, somewhere between 10 

and 20,000 construction workers just to put people back in the 

home where they were, not to accelerate to a new level, just to 

bring us back to where we were. 

And anything that we do that stymies the effort to keep people 

in business, to keep people going is just going to make it more and 

more impossible to put people back at home and back at work. 

Mr. WALBERG. Thank you. My time has expired. I yield back. 

Mr. BYRNE. Thank you, Chairman Walberg. The chair now recognizes the ranking member of the subcommittee on Workforce Protections, Mr. Takano, for five minutes. 

Mr. TAKANO. Thank you, Mr. Chairman. Mr. Rubin, in your testimony you mentioned a case you litigated involving warehouse 

workers in a Walmart-Schneider facility. 

That case hits close to home. In fact, the facilities in question are 

in my congressional district. 

The case of these workers takes what, to many, seems like a 

technical, legal debate, and puts a face to the workers who are protected by our joint employer laws. I want to give you a chance to 

share a little more about the facts of the case. 

Mr. RUBIN. Sure, 1700 workers, many earn far less than the minimum wage, they earned money based on a bogus piece rate, where 

because the company up the ladder paid the labor services contractor on a piece rate for truck loaded or unloaded, the contractor 

in turn paid the workers, depending on how many trucks were 

loaded or unloaded, on a shift among the four warehouses at the 

same time. 

So no worker had any idea what any other worker was doing in 

terms of loading or unloading, whether those numbers were accurate. 

Many of the workers had to sign their pay stubs when they went 

to work in the morning and the supervisors filled those in later 

with whatever hours the supervisors claimed should be in there. 

The workers had to show up hours before the work began. They 

weren’t paid for those hours. The workers were often sent home 

early when there weren’t enough trucks to unload. They weren’t 

paid for those hours. There was a whole series of egregious labor 

violations that went on for decades in those warehouses and that 

was the basis of the lawsuit. 

And the control was exercised by Walmart and by its operator by 

dictating the terms and conditions of employment, acting indirectly 

through the next level down. Indirect simply means you’re using 

someone else as your agent. You’re telling that next company down 

what to do, how to do it. Your instructions are carrying through to 

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the workers. So the ultimate responsibility was held to be shared 

by all of the companies. 

Mr. TAKANO. So that’s a horrible situation for those workers, terrible working conditions, being cheated out of their pay. 

What remedy would they have had if this bill were to pass? 

Mr. RUBIN. They would have no remedy at all. Their only recourse would be against the labor services contractor, who as we 

found out when we finally entered into settlement negotiations, 

had only enough money to pay, I think, it was about seven percent 

of the total settlement combined over a period of years. 

What happens in real life, when you’re talking about the facts, 

is that as soon as there’s a threat of labor organizing, as soon as 

there’s a threat of a wage-and-hour lawsuit, the company up the 

ladder terminates its contract with the small business. If small 

businesses are concerned, the concern should be based on the fact 

that they have no job security. 

What happens is they lose their contracts and the workers lose 

their jobs as soon as one worker complains. So if a worker complains, not only is that worker out of a job, but all of his or her 

coworkers are out of jobs, too, because the labor services contract 

is terminated. 

Mr. TAKANO. So let me get this right. So right now, I mean the 

law gives some protection to these workers, but if we pass this new 

bill, remedies go away for those workers, and you’re telling me that 

even the small business, that the contractor, the contractor with 

the big business becomes even more vulnerable under this law? 

Mr. RUBIN. That’s why I don’t understand why this is called the 

Save the Small Business Act. The small businesses are the ones 

who are caught in the squeeze. They’re the ones who are hurt by 

this language because they will bear full responsibility even if they 

don’t have full responsibility. 

Mr. TAKANO. So this really should be called the Screw Workers 

and Screw Small Businesses Act. 

Mr. RUBIN. Not for me to say. 

Mr. TAKANO. I’m sorry for using such a word. 

Mr. RUBIN. That’s the effective impact. 

Mr. TAKANO. So I’m curious about as to whether this bill creates 

perverse incentives that could harm franchisees or smaller businesses that operate as subcontractors for larger firms. Under this 

bill could franchisors or warehouse owners exercise exceptionally 

broad control over the labor relations of its franchisees or subcontractors but enjoy immunity from liability for employment law 

violations associated with that control? 

Mr. RUBIN. Yes, that’s exactly what can and would happen. 

Mr. TAKANO. Ms. Kennedy, did any of your, did you -- you didn’t 

ever recall consulting any lawyers, but did you ever read any articles about this possibility that your franchisor could exercise far 

more control over your operations but yet put all the liability for 

violations onto you? 

Ms. KENNEDY. I have read information about that. But I would, 

I’m always -- 

Mr. TAKANO. Did you ever talk to your own attorney, not the 

franchisor’s attorneys? 

Ms. KENNEDY. I do have counsel -- 

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Mr. BYRNE. Let me just interrupt for a second. 

Mr. TAKANO. Wait, wait, Mr. Chairman, this is my time. 

Mr. BYRNE. Well, I’m going to just -- I’m going to give you your 

time. The communication between an attorney and client is privileged and, I don’t think you mean to insert yourself into that privilege and get her to divulge -- 

Mr. TAKANO. No, Mr. Chairman, I’m not. I just want to know if 

she’s -- 

Mr. BYRNE. I don’t think she should be asked -- 

Mr. TAKANO. -- consulted her own attorney or the company’s attorney -- 

Mr. BYRNE. We should not be asking her about what her attorney told her. That’s inappropriate. 

Mr. TAKANO. But, Mr. Chairman, this is my time. 

Mr. BYRNE. I’m going to let you have your time, I’m just saying 

-- 

Mr. TAKANO. But it is my time, Mr. Chairman. 

Mr. BYRNE. -- she has a recognized privilege and we cannot invade that privilege here. 

Mr. TAKANO. Okay. Well, Ms. Kennedy, have you consulted your 

own attorney about this -- not, not -- the franchisor’s attorney? 

Ms. KENNEDY. Yes. 

Mr. TAKANO. Okay. Well, I’d be interested to know just whether 

or not, whether you have any advice on whether the company’s control, the franchisor’s control would leave you in a more vulnerable 

situation, more liable? 

Ms. KENNEDY. I don’t know that I have any information or advice 

that I want to share about that today. I don’t think that that’s really what I’m here to talk about. It hasn’t happened. I can’t speak 

to what has happened. 

What I am most concerned about is, is that it could happen. If 

we don’t find a way to bring this language back into what is my 

reality, which is defining what is direct, immediate control over 

employees. It’s the language that we’ve always worked under. 

Those employees that I have, I’m proud of, and they work for me. 

And when we open -- when we use these words like indirect or reserved, unexercised control, that’s where the danger is. 

Mr. TAKANO. Thank you for your response, Ms. Kennedy. Thank 

you. 

Mr. MACDONALD. Mr. Chairman, if I might -- 

Mr. BYRNE. We got to follow the protocol here. 

Let me make sure I say this for everybody here who is not an 

attorney. It is not appropriate to ask somebody to tell us what an 

attorney has -- their attorney has told them. They have an attorney-client privilege, and it’s not appropriate for the House of Representatives to try to invade that privilege. 

Ms. FUDGE. Then they can say no. 

Mr. BYRNE. Well, they are not lawyers and they don’t have their 

lawyers here with them to give them that advice. And I think it 

would not be responsible for those -- 

Ms. FUDGE. And you cannot be their lawyer. 

Mr. BYRNE. I’m not trying to be their lawyer. 

Mr. TAKANO. Mr. Chairman -- 

Mr. BYRNE. But I -- 

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Mr. TAKANO. Mr. Chairman -- 

Mr. BYRNE. Let me finish, let me finish what I’m saying. 

Now, those of us that are lawyers understand this is a very serious thing. And some of us are officers of the court, whether we’re 

these folks lawyers or not. And we’ve got to be careful -- and I don’t 

think it’s the intention of anybody on this panel to try to invade 

the attorney-client privilege. But it is a privilege. It is recognized 

by the courts. And we should not be invading that privilege. 

If they want to consult their attorneys to come back to us and 

give us an answer, that’s a different thing. But to ask them without their attorneys being present to give us information about what 

their attorneys have told them, I don’t think is appropriate. 

Mr. TAKANO. Well, Mr. Chairman, I was merely trying to clarify 

whether such communication had taken place, whether she had her 

own attorney, whether she had consulted her own attorney or 

whether she was being guided by the franchisor’s attorney. 

I wanted to make sure that her interest as a small business 

owner was being represented, as opposed to receiving guidance 

from the franchisor’s interest. And because the law, the way this 

law is written is so perversely against both workers and small business people. 

Mr. BYRNE. Mr. Takano, you are welcome to ask the questions 

that you want to ask, and they can give you the answers. But when 

we’re wandering into a situation where we might be asking a nonlawyer to make a decision about whether or not they’re going to 

give up a privilege that is recognized by the courts, I think it is 

appropriate for us to-- 

Mr. TAKANO. Well, I have no intention of asking for any privilege 

to be waived, merely whether or not the communication, whether 

she had consulted her own attorney versus the franchisor’s attorney. 

Mr. BYRNE. Thank you. 

The Chair now recognizes the gentleman from South Carolina, 

Mr. Wilson, for five minutes. 

Mr. WILSON. Thank you, Chairman Byrne. And thank you all for 

being here today, particularly Ms. Kennedy. I appreciate the opportunities you provide. 

The International Franchise Association gives such opportunities, 

and then from that, you help develop -- and the members help develop -- small businesses that provide entry-level jobs for people to 

have first time employment and prove themselves and succeed. In 

fact, in South Carolina we particularly recognize this. U.S. Senator 

Tim Scott had his first job at a Chick-fil-a franchise in North 

Charleston. And so how wonderful it was that he had that opportunity. And so I want to thank you for what you do. 

In regard to that, in your testimony you provided several examples how the joint employer standard has increased the cost for you 

to run your business. 

You mentioned that you now provide job application forms, employee handbooks and recruitment materials that were previously 

provided by the franchisor. 

Could you elaborate as to how the cost of the joint employer 

standard is reducing job creation and growth? 

Ms. KENNEDY. Thank you very much. I’d be glad to. 

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The one thing that I can tell you for sure is we keep track in the 

restaurant business, my restaurant business, of every penny and 

how it is spent, and we find that the most valuable way to spend 

our resources on something that I’m passionate about, which is 

education and helping our young people get started in their work 

life. 

In order to do that we need good tools. We need to provide them 

with training documents, standard structures that help them learn 

different parts and different skills of the restaurant business. It’s 

not as simple as just becoming a cashier and running a cash register. It’s about food safety. It’s about understanding how to direct 

employees and manage money and manage inventory. And those 

skills, given the opportunity to learn them, can help them run any 

business in the world. 

The costs for me to do that have gone up substantially. I have 

to source, find, pay for, and produce many of the items that I used 

to get from my franchisor. Simple things like ‘‘Now Hiring’’ banners, flyers that go on bags and on trays, all of those pieces and 

products that I use to let people know that I am looking for really 

great people, cost me more money to go produce. 

My handbook, the $9,000 was just a start. Every time there’s a 

change in the work environment, I have to update that handbook. 

That’s expensive, and it’s definitely not something that I’m an expert at. And so I have to pay to get the legal representation that 

I feel I need to make sure that I’m complying with all of the many 

pieces of legislation and work rules that I’m responsible for. 

Mr. WILSON. Well, again, thank you so much. I know personally 

the opportunities you provided -- my third son Julian began at 

Ruby Tuesday, and did great work. And then my youngest son 

started at Atlanta Bread Company serving. So, what great opportunities you provide. 

Equally, Mr. MacDonald, I appreciate the National Association of 

Home Builders. 

In fact, I, in my real estate practice, was a member of the Columbia Area of Home Builders Association, and I still pay my dues. 

Mr. MACDONALD. Thank you. 

Mr. WILSON. I know -- well, they are very persistent. 

But I appreciate the jobs created. And it’s family-run businesses 

that span generations such as yours. 

You discussed in your testimony how small local businesses are 

negatively impacted by the expanded joint employer rule, and that 

without having the resources of larger companies resulting in higher home prices for consumers. 

Can you explain how the housing market would be negatively 

impacted by the expanded joint employer mandate? 

Mr. MACDONALD. Absolutely. And thank you for the question. It 

is exactly where you were headed there, that we have small companies, small companies don’t have the access to in-house lawyers, to 

in-house H.R. personnel, and all that it takes to be in business. So 

we have to rely upon what we can glean from the street or what 

we have to do in the way of hiring outside counsel on our own. 

And frankly, and all due respect to Mr. Rubin, he’s the first attorney that I’ve heard that’s willing to opine as to what’s going to 

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happen in labor law after Browning-Ferris. I can’t find an attorney 

who says, ‘‘you need to do this, this and this.’’ 

The attorneys that I have consulted have said, ‘‘I can’t answer 

the question yet until there’s more case law.’’ We all know that 

case law means much more legal expense, many more problems for 

small business owners. 

So who’s going to succeed here? It’s only going to be the big 

builders, the larger people who have larger volume and can afford 

to have staffs of attorneys to deal with these issues. 

The smaller subcontractors, the smaller contractors are just not 

prepared. And can’t be. 

Mr. WILSON. And final, again, home builders are great citizens 

and corporate citizens and business leaders of our America. We appreciate the home builders association. Thank you. 

Mr. MACDONALD. Thank you, sir. 

Mr. BYRNE. Thank you, Mr. Wilson. 

The Chair now recognizes the gentleman from New Jersey, Mr. 

Norcross, for five minutes. 

Mr. NORCROSS. Thank you, Chairman. 

Common law to 1935 when the NLRA was passed. From 1935 to 

1984, 46 years working off the same decision, getting decisions 

from the Board, clarifying where it was. Then we had 1984 to 2015, 

only 31 years. And here we are from 2015 to 2017, or as I call it, 

‘‘back to the future.’’ Because what has happened is we went back 

to where we were for 46 years of decisions, 46 years. 800,000 

franchisees, not one has been considered a joint employer. 

So I listened to the testimony and I’m trying to make sense how 

is it that we can work together to address the issues that we’re 

here hearing from you. 

And the first thing that comes to mind is, Mr. MacDonald, you 

mentioned that the franchisees or -- excuse me -- the joint employer 

decision is hurting the construction industry. 

How would you reflect on that in the last two years, companies 

have grown, those who are starting? There’s an increase of construction companies. Isn’t that the exact opposite of what you suggested? 

Mr. MACDONALD. Well, it’s the indecision that’s going to put an 

end to it. We’re only seeing an -- 

Mr. NORCROSS. Well, you mentioned that this would keep people 

from going into business. 

Mr. MACDONALD. Yes, sir. And it will keep people -- 

Mr. NORCROSS. But it increased. 

Mr. MACDONALD. Would you like for me to answer the question? 

Mr. NORCROSS. No, but you -- 

Mr. MACDONALD. The answer to the question is that we went 

through an extreme period of negative growth in the construction 

industry in 2008, 2009, and 2010 and we’ve seen a rebirth of housing starts. Housing starts have almost doubled in that period of 

time, and that’s what -- it is a simple supply and demand issue. 

I will also say that the protection of workers and labor in our industry is really based on supply and demand. I will tell you right 

now -- 

Mr. NORCROSS. Well, thank you. I don’t -- 

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Mr. MACDONALD. -- because of the shortage of labor that we’re 

having -- 

Mr. NORCROSS. I want to keep -- 

Mr. MACDONALD. -- nobody wants to treat an employee poorly. 

Mr. NORCROSS. Excuse me. My time. I would like to keep a narrow focus of what I was asking you, because the employee is not 

going to be impacted by the joint decision whether or not he is 

going to go to work for somebody, and that’s the problem that we’re 

having. 

The fact of the matter is, particularly in construction, the job site 

safety, it’s everybody working together. You’re not going to throw 

that on another employee. That’s where all the liability comes in. 

And that’s, quite frankly, the reason why the deaths on the job has 

been decreasing, because everybody works together. 

I just want to make sure that when we looked at what’s going 

on here, instead of going back to the decisions of 46 years, we’re 

going all the way back beyond what it used to be. So the idea of 

having precedents and predictability, you’re going beyond that. 

And I just want to follow-up with my last question. When I 

looked at AT&T now, the retail stores, almost 60 percent of their 

stores are operated by one of two very, very large subcontractors. 

Completely contradicting what you’re telling us today. 

Mr. Rubin, I was wondering if you could talk about, in a broad 

sense, the different tactics that are used to erode the employer’s obligations to employees and how they might vary depending on the 

industry. 

Mr. RUBIN. Varies depending on the industry and the creativity 

of the dominant company. There are lots of ways to do it. The 

AT&T example is one. We know through the Communication Workers how they’re able to structure the relationships so that they 

maintain their control. 

Mr. NORCROSS. Because in the construction industry, the fact of 

the matter is joint employers is not happening all that often. 

Mr. RUBIN. Very rarely. Of the 9,036 cases identified by Mr. 

Fasman that were filed under the FLSA in that one year, I bet no 

more than two or three included a joint employer allegation. It is 

a rarely advanced theory but a critically important theory, which 

is why we need to preserve it. 

It’s not just that the law went through a 46-year period. Under 

the Fair Labor Standards Act this would change law going back 81 

years since the FLSA was enacted. Even with the NLRA, this notion of direct and immediate didn’t come into play until 2002 in the 

Airborne Express footnote. So in fact, it’s not even 1984. 

The standard that was rejected in Browning-Ferris was, in fact, 

the 2002 standard, it’s a period of only 13 years. 

Mr. NORCROSS. Thank you. 

We need to sit down and work together because these facts are 

completely opposite of each other. We don’t need to go all the way 

back. We need to sit down and have a reasonable discussion and 

work this out. I yield back. 

Mr. BYRNE. Thank you, Mr. Norcross. 

The Chair now recognizes the gentleman from Tennessee, Dr. 

Roe, for five minutes. 

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Mr. ROE. Thank you, Mr. Chairman. And I want to thank the minority staff for their well wishes and flowers you sent me during 

my recent surgery and continued recovery. So thank you for that. 

I appreciate that very much. 

You know, uncertainty, when you have an uncertainty, that creates a situation where people react. And Ms. Kennedy pointed out 

clearly that the uncertainty of this particular definition of the 

NLRB, what is the joint employer status, created a chain of effect 

where she then had to go and create her own book, which cost 

$9,000 and a continuing recurring cost. That cost could go in -- that 

money could go into expanding your franchise, increasing wages, 

growing your business where it is, de novo where it is. So the uncertainty is done. And the fact that something hadn’t happened 

doesn’t mean it won’t. 

And so I know exactly -- in my business -- I’m a small business 

person. And I know I’ve reacted when ERISA law changed. We 

would do certain things. The fact that it hadn’t happened didn’t 

mean that it wouldn’t happen. 

So I’d like to ask you, Ms. Kennedy -- and thank you all, all of 

you, for being here -- how much involvement does your franchisor 

have in your daily affairs of your business and employees? For example, does your franchisor sign the paychecks or hire employees 

or decide what hourly -- what hours someone would work? 

Ms. KENNEDY. They do not have any involvement in any of the 

day-to-day interactions with my employees. 

Mr. ROE. And yet this uncertainty has caused them to change 

the relationship they had with you. Am I correct on that? 

Ms. KENNEDY. I believe you are correct. 

Mr. ROE. And that change created, what, an added expense for 

both you and the franchisor? 

Ms. KENNEDY. Absolutely. 

Mr. ROE. Am I correct on that? 

Ms. KENNEDY. You are. 

Mr. ROE. I think the uncertainty is important. And, look, this is 

great for employment of attorneys who have differences of opinion. 

And everything is arguable, I’ve found out. Not matter how it’s 

said. 

So, Mr. Fasman, we’ve seen an age of e-commerce and the importance of an expedited delivery. What limitations does the new joint 

employer standard put on companies who may be exploring innovative delivery services or new partnerships with other businesses to 

satisfy growing consumer demand for rapid product delivery? 

Mr. FASMAN. Well, that’s a very good question. And I think it 

goes back to exactly what you were, what you were saying, Congressman, and that is, that it’s very difficult to understand exactly 

what a contractor can do and cannot do under this standard because it’s not based upon the facts of the relationship. It’s based 

upon potential or indirect control that’s a question that’s only answered in retrospect. That is, I don’t know what potential control 

could be. And as you said, Mr. Rubin and I can argue about potential control in any relationship. And that’s properly how we made 

our living for a long period of time. 

But I mean, those things are not, they’re just not clear. And 

structuring a relationship, a commercial relationship is vital in the 

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areas that you’ve spoken about. And that’s why basically saying, 

‘‘let’s go by the facts, let’s not go by potential and unreserved or 

unexercised control’’ is so important. 

Mr. ROE. I want to thank Mr. Byrne for this, to try to put some 

clarity to this. 

I had -- not a franchise business, but I was in my business myself the entire time before I came to Congress, over 30 years. And 

we contracted -- a medical practice. And we contracted cleaning 

services. And we didn’t do that ourselves. We contracted that. I expected certain standards to be met in cleaning the office so it would 

be presentable the next day. I didn’t exercise direct control over 

that. If we had been a franchise I would have been caught in that 

uncertainty. What do I do. 

And I think that uncertainty is clear and it’s costing millions, if 

not billions of dollars to comply with this uncertainty. And if you’ve 

got that many people, 700 and something thousand franchises, 9 

million employees, it is a gigantic number. Mr. Rubin, just a question. Yes or no. Was that $22.7 million dollar settlement a class action lawsuit or just not? 

Mr. RUBIN. It was a class and collective action under state and 

Federal law. 

Mr. ROE. So what was your fee out of that $22.7 million? How 

much of that did the workers not get? 

Mr. RUBIN. The workers got up to $80 thousand -- 

Mr. ROE. No, I didn’t ask that. 

Mr. RUBIN. -- based on the amount of -- 

Mr. ROE. I said what percent of that $22.7 million went to you 

and your firm, not to the affected workers. 

Mr. RUBIN. In order to litigate that -- I don’t know exactly how 

much our firm made but there were 5 different -- 

Mr. ROE. Twenty-five percent? 

Mr. RUBIN. -- there were five different firms who had to work on 

it, who put in more time than we were paid, if you do it on an 

hourly basis. 

Mr. ROE. Twenty to thirty percent? Forty percent? How much? 

Mr. RUBIN. No, no, no, no, no. I think it was probably in the low 

20’s. But we were paid less than our hourly -- had we been billing 

on an hourly rate, our fee would have been more than twice the 

amount we ultimately received. 

Mr. ROE. I yield back. 

Mr. BYRNE. Thank you, Dr. Roe. 

The Chair now calls on the gentlewoman from Ohio, Ms. Fudge, 

for questioning for five minutes. 

Ms. FUDGE. Thank you very much, Mr. Chairman. 

Thank you all for being here today. 

Mr. Rubin, before I give you the balance of my time to respond 

to Mr. MacDonald, who just shared with us a communication between he and his lawyers that has now said that you’re an outlier 

in your thought process, and to address the question that was just 

asked by my colleague: Of course, we know lawyers get paid. I 

mean, this is ridiculous. But let me just make a couple of comments and then I’m going to turn over my time to you, sir. 

First, we have heard ad nauseam about the decision in Browning-Ferris. As my colleague said, we’ve had 35 hearings about this. 

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It is interesting that every time my colleagues across the aisle don’t 

like a law, they call it uncertain, ambiguous, unsustainable. Just 

because you don’t like it doesn’t mean you don’t understand it. And 

they clearly understand it. 

And I just want to remind our Chairwoman Foxx that intent is 

a standard that has been accepted in American jurisprudence for 

generations. It did not start here. 

And lastly, I just have to say this: I am trying to figure out for 

the life of me what Tim Scott has to do with what we are talking 

about today. So he worked at Chick-fil-a. So what? I mean, did he 

bring it up because he’s black? Did he bring it up because he 

thinks Tim Scott might support his position? 

I take great offense to using a U.S. Senator, who happens to be 

my friend, in something so ridiculous. 

My time is now yours, Mr. Rubin. 

Mr. RUBIN. Thank you. In response to the questions about uncertainty, first a bit of background. 

I try to be well versed in the law. Before I started practicing I 

was a clerk for a Supreme Court justice. I try to be well versed in 

the facts because my job as a litigator is to discover and know the 

facts and apply the facts. And I try to understand cases like the 

Browning-Ferris decision and the Freshii advice memorandum by 

actually looking to see what’s written in those opinions, what 

standards are applied. 

You start with the Browning-Ferris decision. It actually simply 

reiterates the standard that I quoted before about sharing the essential terms and control over the terms and conditions. The standard itself is not objectionable. 

What people seem to be complaining about, Mr. MacDonald and 

others, Ms. Kennedy, is that they have been advised that there’s 

some uncertainty. But in each of the instances they’ve described to 

me there’s no way a litigator would pursue their case on a joint employer basis, which is why of the 9,000 FLSA cases only a handful 

were ever pursued under joint employer basis. 

What were the facts in BFI? We have to focus on them. BFI 

owned the plant. It set the shifts. It told the employees where to 

work. It capped their wages. It decided when they would have to 

work overtime. It decided how many workers would be working 

overtime. It decided when to stop the assembly line for breaks. It 

controlled the line speed. It had the right to veto any wage hike 

or wage change the lead point offered. It trained the workers. It 

had the power to fire and, in fact, it did terminate two workers 

that it didn’t want, and it had the power to fire the entire work 

force. 

Those are the facts of Browning-Ferris. And any lawyer looking 

objectively at those facts under the standard that has been part of 

the National Labor Relations Act would conclude that party should 

participate in collective bargaining, Browning-Ferris that is, because it had the right to affect terms and conditions of employment. 

And certainly we haven’t talked a whole lot about the Fair Labor 

Standards Act, but the Fair Labor Standards Act -- 

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Ms. FUDGE. Mr. Rubin, if I could just interrupt you one moment. 

I really would like to yield the last of my time to our ranking member, if you would allow me to do that, sir. 

Mr. SCOTT. Thank you. Mr. Rubin, I think you can finish up that 

statement, but include in that, if you have a Fair Labor Standards 

Acts violation and somebody comes in and says, ‘‘I’m not an employer under this definition,’’ and then the other guy comes in and 

says, ‘‘I’m not an employer under this definition either,’’ is it possible that nobody is responsible? 

Mr. RUBIN. Wow. In fact, as I look at the language of the Act, 

that is possible. 

Imagine this circumstance: Company A is in charge of hiring. 

Company A and B share responsibility for firing. And company B 

also sets wages. The worker says, who is my employer under this 

definition? Well, does either company, A or B, control the essential 

terms, which are then listed? There are nine of them in the conjunctive? No. 

So in that case there may be no employer. 

Mr. SCOTT. So if there’s a finding that I wasn’t paid overtime, nobody owes it? 

Mr. RUBIN. Neither company is a joint employer and arguably 

neither is an employer at all. The uncertainty, this language explodes uncertainty to the point where every single case, where any 

element, any term or condition of employment is shared, there’s 

going to be litigation over whether either company could be -- 

Mr. BYRNE. Mr. Rubin, you’re going to have to wrap up again. 

Mr. RUBIN. I think I’ve answered the question. 

Mr. BYRNE. Okay good. Thank you. Thank you. 

All right. The Chair now recognizes for questions, for five minutes, the gentlewoman from New York, Ms. Stefanik. 

Ms. STEFANIK. Thank you, Mr. Chairman. 

Mr. Fasman, in the amicus brief submitted by Microsoft in the 

Browning-Ferris case, Microsoft argued that the NLRB’s new 

standard will discourage companies from implementing policies and 

initiatives that go above and beyond their legal requirements. 

For example, market leaders with complex supply chains will be 

penalized simply for implementing policies on responsible product 

sourcing or human rights, as well as labor and environmental 

standards. 

In this Congress, I’ve worked on the Millennial Task Force, 

which I chair with my colleague, Mr. Messer, who also sits on this 

committee, and we have explored how today’s companies are changing business models to attract and retain the largest segment of 

our work force, millenials. What companies such as 

PriceWaterhouseCoopers, Uber, and Google are telling us is that 

millennials are looking for companies that have a purpose larger 

than the business. Corporate citizenship is now more than ever a 

key factor in millennials interest in a job. 

So how does this new joint employer standard actually chill positive corporate policies by American companies, specifically large 

companies with complex supply chains? 

Mr. FASMAN. I think that that’s a very good point. And the answer is that large companies with supply chains and with innovative programs, under the standard that the labor board has creCEWDOCROOM with DISTILLER

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ated, have to be extremely careful about the control that they exercise. It is implementing policies from the top down. That seems to 

me to be a very doubtful enterprise if in fact this is the standard, 

because the more control you retain, the more you say you should 

do this, this is how we want to do this, the more likely it is that 

you’re going to be considered a joint employer. 

Ms. STEFANIK. Is there any more specific example you can provide? 

Mr. FASMAN. I can’t think of any sitting here right now. 

Ms. STEFANIK. Okay. Thank you very much. 

I yield back. 

Mr. BYRNE. The gentlewoman yields back. 

The Chair now recognizes the gentlewoman from Oregon, Ms. 

Bonamici, for five minutes. 

Ms. BONAMICI. Thank you very much, Mr. Chairman. And 

thanks to each of the witnesses for being here today. 

We’ve had this conversation many times. I am one of the people 

here on the committee who used to practice law as well. I represented franchisees in disputes with franchisors, and I certainly 

know and appreciate the franchise model and the opportunities 

that it creates. 

Before that, though, before law school, I worked at my mom’s 

small business. And I look at the title of this Save Local Business 

Act and, you know, we all want local businesses to thrive and succeed. This bill is not the way to do it. 

You know, and as we’ve heard multiple times, this BFI case that 

we’ve talked about so much does not upend the franchise model. 

And as we’ve heard again this morning, that was made clear in the 

Freshii case, a franchisor is not a joint employer if they act like a 

franchisor by protecting brand standards. And yes, a franchisor can 

provide guidance. And there was an advice memo from the NLRB 

on that. Employee handbooks, payroll services. Those things, as 

long as they’re optional, do not make a franchisor a joint employer. 

And you know, that, if they’re going to act like a joint employer, 

they should be treated as a joint employer. 

And Mr. Rubin, you’ve talked a little bit about why a fact-specific 

standard is important. And I really appreciated also your response 

to ranking member Scott’s question, because as I read this language with the ‘‘and,’’ all of those have to be met to be a joint employer. 

Why is it important that there be a fact-specific standard when 

assessing joint employment? 

Mr. RUBIN. Under any standard, the current standard under the 

FLSA, the NLRA, state law, other federal statutes, it all depends 

on the actual relationship between the parties. There’s so many 

ways franchisors, franchisees, lead companies, supplier companies 

can structure their relationship. That’s a good thing. We welcome 

flexibility in how companies operate and how they interact with 

each other -- 

Ms. BONAMICI. And those are typically spelled out in the franchise agreement, correct? 

Mr. RUBIN. Yes. And it’s set forth in as clear language as they 

can set it forth. And the courts must look at the specific factors and 

see what happens, both as a matter of contract, and then on the 

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ground in terms of the actual exercise of control. That’s why it’s 

fact-specific. 

You can’t just say, because you have a relationship of user/supplier or franchisor/franchisee, you are or are not a joint employer. 

You have to look at the facts on the ground and the legal relationship by contract under the law in the jurisdiction under the particular statute. That’s how you analyze cases. 

Ms. BONAMICI. Well, I certainly agree that the language in this 

bill would make it much more confusing and create much more uncertainty about who is a joint employer, what entity is a joint employer. 

Mr. Rubin, we’re sitting here in 2017 and there’s still a pay gap 

between women and men. It’s difficult for individuals to prevail in 

Equal Pay Act claims. Congress did pass the Lilly Ledbetter Fair 

Pay Act in 2009. There’s also the Paycheck Fairness Act, which I 

support that would further strengthen the right of pay equity. 

If this bill, the Save Local Business Act, were to pass, would it 

make it more difficult for a worker to succeed in an Equal Pay Act 

claim? If so, how? 

Mr. RUBIN. It probably would. That’s another great uncertainty 

with the way this bill is written. The Equal Pay Act is incorporated 

into the FLSA. 

Ms. BONAMICI. Right. 

Mr. RUBIN. As a result it adopts the standards set forth in the 

FLSA. It depends on Congress’ intent at the time, and that’s why 

there’s going to be litigation over it. But certainly if this bill 

changes the definition from what it’s been going back to the early 

1930’s to what is proposed here, it will affect the Equal Pay Act, make it far more difficult, in fact, I think impossible, to prove joint 

employer relationships. 

Same thing will happen under the Family Medical Leave Act and 

certainly under the Migrant and Seasonal Agricultural Worker Protection Act, which also borrows the FLSA definitions. So we are 

going to have an explosion of litigation, more uncertainty, more expense for franchisors, franchisees, contractors and the like, if this 

bill were enacted. 

Ms. BONAMICI. And I know it’s been asked before, but just to 

clarify, how many cases are you aware of where a franchisor has 

been found to be a joint employer with its franchisees under the 

Fair Labor Standards Act? 

Mr. RUBIN. Zero. 

Ms. BONAMICI. Thank you. 

I yield back the balance of my time. 

Mr. BYRNE. The gentlewoman yields back. 

The Chair now recognizes the gentleman from Georgia, Mr. 

Allen, for five minutes. 

Mr. ALLEN. Thank you, Mr. Chairman, and thank you witnesses 

for enduring this. 

As you can, see there’s a very, varied difference of opinion. I will 

tell you, Mr. MacDonald and Ms. Kennedy, I’m not going to warn 

you of the risk of running your business. I’m a small business person and I, for years, and it’s a construction business, and I pretty 

well understood the risk. And I’m not going to try to tell you how 

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try. Is you decide what’s best for you and your employees. And we 

need to keep it that way, in my opinion. 

As far as this law is concerned, obviously we’ve had two lawyers 

who can’t agree here today. Ain’t America, a great place to live, 

we’re all trying to figure out what is best for, you know, the people 

and the citizens, the great citizens of this country. 

But it is pretty dynamic right now, this economy, and the innovation is very dynamic. And frankly, you know, the five-year business 

plans are a thing of the past. You know, one-year business plan, 

maybe six months, I don’t know, maybe 30 days is what we have 

to deal with in the business world because your competition is getting, you know, it’s just difficult out there. And but that’s good. 

That’s good for the customers. And we haven’t talked much about 

customers here today but that’s who we, that’s who we work for. 

But going back to these models and what we’re trying to clean 

up here, as far as trying to make at least the lawyers understand, 

you know, again we’ve got the lawyers disagreeing on, ‘‘well, there’s 

going to be more litigation after this law,’’ versus, you know, ‘‘well, 

we’ve got to have this to decrease litigation.’’ 

You know, Mr. MacDonald, as far as your relationship with your 

subcontractors -- and also Texas is a right-to-work state. 

Mr. MACDONALD. That’s true, actually. 

Mr. ALLEN. Yeah. Yeah. In fact, going back, Mr. Fasman, as far 

as, you know, you’ve got states in this country that are right-towork states, and you’ve got states that are not right-to-work. 

This Browning-Ferris case, obviously this was in California. 

Georgia is a right-to-work state. Texas is a right-to-work state. 

How is that, I mean, how do you deal with that? 

Mr. FASMAN. Well, I think it’s a different -- so is Michigan, by 

the way. 

Mr. ALLEN. Yeah. 

Mr. FASMAN. And I think the real question in any of these situations is who the employer is. And I don’t think that that’s necessarily directly related to the right-to-work issue at all. But I 

would like to, Congressman, I would like to utter some words that 

haven’t been said during this hearing. Because everybody has 

talked about, there’s never been a franchisor who has been found 

to be a joint employer. 

There’s been 145 days of hearing in the McDonalds’ litigation on 

just that point. General counsel Griffin is using the Browning-Ferris decision to prosecute McDonalds and all of its franchisees across 

the country. 

There’s an air of unreality here in the questions that have been 

asked. I mean, to say there hasn’t been a franchisor who has ever 

been found to be a joint employer, I mean, tell that to McDonalds 

who’s spent the last 145 days, and continuing, in hearings on this 

point. 

And I find it unbelievable that nobody has mentioned that. I just 

did. 

Mr. ALLEN. Yeah, and I am glad you brought that up. I was 

going to get to that as well. 

As far as the right to work situation, Mr. MacDonald, I know, 

you know, one of the questions is whether you work in union or 

open shop. And at least in a right-to-work state you can have two 

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gates and you can work, work both union and open shop subcontractors. 

Do you have any subcontractors who work under those, under 

that scenario? 

Mr. MACDONALD. Yes, sir, we certainly do. 

Mr. ALLEN. You do? 

Mr. MACDONALD. The people that provide our elevator services 

Thyssen Krupp are union, and even their maintenance personnel 

are as well. And we work hand in hand with them. 

Mr. ALLEN. Right. So we don’t have any issues there that -- these 

were some concerns that were brought up about, and I know -- and 

I’m not sure in a state that’s a not right-to-work state, you don’t 

have that option. Is that correct? 

Mr. FASMAN. I think that that’s correct. I think that you don’t 

have that option. 

Mr. MACDONALD. And it’s a state-by-state situation. And you 

bring up a wonderful point that a lot of state law is going to be 

trampled as we try and unravel all the litigation around this, that 

is pending and it’s working quite well, and it’s working well in 

Texas. 

Mr. ALLEN. Well, obviously, you know, we’re here to try to dismantle regulatory involvement in the process. We think that’s the 

most innovative, productive way for this country to grow and to get 

people to work. 

Thank you for your testimony. 

Mr. BYRNE. The gentleman yields back. 

The Chair now recognizes the gentlewoman from North Carolina, 

Ms. Adams, for five minutes. 

Ms. ADAMS. Thank you, Mr. Chairman. 

Ranking member, thank you as well. And thank you to the witnesses today. 

You know, what’s interesting to me is that the very people that 

my colleagues claim to be advocating for with the support of H.R. 

3441 are those who will suffer the most if this bill is enacted. 

The focus on the harm the joint employer standard does to 

franchisees is a red herring because the National Labor Relations 

Board has really never found the franchisor to be a joint employer. 

So it seems that all this bill does is create a scheme that would 

give franchisors the power to scourge labor and employment laws 

while leaving franchisees increasingly exposed to lawsuits. 

So I have a couple of questions. Mr. Rubin, my colleagues claim 

that H.R. 3441 creates certainty for franchisees and the joint employment context, so could you explain why this may not necessarily be the case and what uncertainty might arise from narrowing the standard in this way? 

Mr. RUBIN. The only certainty created by the bill is, as Representative Scott was pointing out, it is certain that no franchisor 

or other large company could be held liable as a joint employer. It 

creates uncertainty because there are still lots of other federal statutes and lots of state statutes that have a range of different standards. 

The standards proposed here still have to be applied on a factby-fact basis. 

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There is no way, no court, at any time, since the Supreme Court 

in the Rutherford in 1947, has ever tried to analyze a joint employer case without looking at the facts. 

There is always uncertainty until the facts are developed, a wellcounselled franchisee, small business, large business, franchisor 

will know how to avoid responsibility by delegating all control to 

the other business or to take on responsibility, as it should, if in 

fact it does control the workers. 

Ms. ADAMS. Okay. So, Mr. Rubin, Ms. Kennedy is concerned 

about the impacts that the common law joint employee standard 

may have on her business, and believes that common law standard 

limits her autonomy as a franchisee and increases cost. Well, 

what’s your view? 

Mr. RUBIN. The common law standard has been in effect for well 

over a hundred years. 

As the board in Browning-Ferris emphasized -- looking at the restatement of the law of agency which sets out the common law 

principle, it is a fair and appropriate way to determine when one 

company is acting on behalf of another. That’s what agency is all 

about. 

Where the franchisor directs the franchisee to do certain things, 

and that’s indirect control, it is responsible for what it has directed 

the franchisee to do. It’s as simple as that. Common law was developed, initially, the principle, for when a company is responsible for 

its employees wrongful acts against someone else. There was strict 

liability imposed on the master for the acts of a servant. 

The statutes have been adopted in order to protect the employees 

of the master so the master doesn’t deprive those workers of their 

rights. And that’s all the joint employer doctrine is about, ensuring 

that the responsible parties are held liable and responsible for bargaining for, and making whole, employees who are deprived of fundamental statutory rights because of a larger company’s own actions. 

Ms. ADAMS. All right. Thank you very much. 

And, Mr. Chair, I yield back. 

Mr. BYRNE. The gentlewoman yields back. 

The Chair now recognizes the gentlewoman from Georgia, Mrs. 

Handle, for five minutes. 

Mrs. HANDLE. Thank you, Mr. Chairman. 

Thank you to all the witnesses here today. I appreciate the insightful testimony. 

For Mr. MacDonald, with the aftermath of Hurricane Harvey and 

now with Hurricane Irma through Florida and into Georgia and 

South Carolina, how important will it be for builders to be able to 

find subcontractors to work with the rebuilding effort? And does 

the expansion of the joint employer standard impact that it in any 

negative way? 

Mr. MACDONALD. It will impact it in a negative way because we 

can’t do anything that impedes our ability to get more folks to come 

to work. We were having problems getting people to come to work 

before the storms in these areas because we have an economic rebirth since the 2008 crash. And so now it’s just being exacerbated 

by the fact that we’re not only trying to produce new housing but 

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we’re trying to repair the damaged housing and get people back in 

their homes. 

Mrs. HANDLE. Okay. Great. Thank you very much. 

Ms. Kennedy, like you, I also am not an attorney. In fact, we actually share a common history in that I, too, started out as a secretary and worked my way up. One may have an opinion about the 

direction of my career since then. But I want to say that I have 

tremendous respect for lawyers both on this panel and across the 

country. At the same time having the view points of people who are 

actually on the ground, having to implement these types of regulations that come through and giving us a very practical real-world 

impact of what you’re trying to deal with, as well as Mr. MacDonald, is incredibly important. And so I appreciate that you’re 

here. 

One question for you: You spoke about owning stores in Iowa and 

Minnesota. If you were thinking to expand into Wisconsin or Illinois, as you know there will be different definitions there, as a result is it possible that a different test for joint employer liability 

under FLSA would apply? 

As a business owner, would it be helpful, more helpful or less 

helpful to ensure that we have a uniform national standard such 

as the one created in this -- bipartisan, I would like to add -- the 

Save Local Business Act, and how important is that consistency 

and uniformity to you. 

Ms. KENNEDY. Thank you very much. It would be very helpful to 

have one clear definition of what joint employer means across any 

state line. Working in two states right now, it’s difficult, challenging. I learn fast and often. When things change from one -- I 

mean, we share a border, that’s about it, from Iowa to Minnesota. 

If I do want to expand -- and I hope to -- in other states besides 

the two that I’m in, it would be very helpful to have one specifically 

clear set of languages that help guide us in how we look at joint 

employer and, in fact, any other type of regulation as we run our 

businesses. 

Mrs. HANDLE. Right. Thank you very much. 

Mr. Chairman, I yield back. 

Mr. BYRNE. The gentlewoman yields back. 

The Chair now recognizes the gentleman from California, Mr. 

DeSaulnier, for five minutes. 

Mr. DESAULNIER. Thank you, Mr. Chairman. I would like to 

maybe make just some macro comments. I’m not an attorney. And 

this is, maybe, in the context, Mr. Chairman, I hope you don’t take 

any offense, it might have been easier on everyone, but not as good 

for attorneys, if we just went back to the more traditional employer/employee relationship. 

I know that the Obama administration and the Department of 

Labor had been working on a study that showed that up to 70 million Americans no longer have a traditional employer/employee relationship. So in that context we have this debate. 

Having worked at fast food restaurants -- and I’m going to date 

myself -- when I was in college in the 1970’s, it was a traditional 

employer/employee relationship. Having owned restaurants for 35 

years -- Ms. Kennedy, I understand the pressure you’re under -- 

but they were independent restaurants, and I wonder about this 

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rule and the impact it might have in the real world, as some of my 

colleagues like to say, having worked in what their definition of the 

real world is, on independent restaurants. 

Because with all due respect to McDonalds, I never felt like, even 

though I was in fine dining, they wanted me to stay in the business 

any longer if they could get my business aside. 

So, Mr. Rubin, in the context, the larger context, I’m just worried 

about this erosion of worker protection. I wish it could be clearer. 

I share that with the majority party. 

I know that former Secretary of Labor, Secretary Reich, likes to 

argue that we should make it simpler just by saying employee/employer relationship is if you’ve received 80 percent of your compensation, you are employed by that employer. It strikes me that 

for everybody that would be easier, knowing that we have to have 

something for these unique franchise relationships. But maybe you 

could just expand on sort of more, in your world, what happens 

with other employers as they try to compete in the world where 

you’ve got this disadvantage, in my mind’s eye, when I’m trying to 

compete with somebody who pays less in terms of wages and benefits because they’re contracting out. 

Mr. RUBIN. Right. That’s an interesting perspective and one we 

haven’t addressed. 

I, too, started my career as a secretary, my first job out of college, and spent a lot of time in a small business, Rubin Hardware 

and Son, in Dorchester, Massachusetts, founded by my grandfather 

in 1922. I understand the impacts on small businesses, and I particularly understand the impacts on small businesses that try to 

follow the law. 

And that’s the problem we have here. The - we’ll call them highroad businesses. That’s a nomenclature, they shouldn’t be called 

that. They’re simple law-abiding business, as every business should 

strive to be and the overwhelming majority do. The problem they 

face is competition from companies that don’t follow the law -- 

Mr. DESAULNIER. Right. 

Mr. RUBIN. -- who are able to save labor costs, by what has been 

called wage theft. By taking money, sometimes in small amounts, 

but in the aggregate large amounts, from workers not in compliance with the FLSA and other statutes. 

And what the joint employer doctrine does, and actually, we see 

it more often in the agricultural context, more than half of the 

cases that have actually been litigated and found joint employer, 

have involved farm workers who have been ripped off by farm labor 

contractors. But we see it in a range of industries where labor is 

a significant element of the employer’s cost, and where the reason 

the company is cheating its workers is because the squeeze is on 

from the higher-up-the-ladder company. 

So the contract doesn’t provide the small business enough profits. 

Yet demands that it acts in a certain way, certain productivity 

quotas that can’t be done legally. That’s when that company caught 

in the middle, that small business has to, find sometimes violating 

the law, and that adversely affects every other small business. 

So it’s not just the small businesses that themselves are in a 

joint employer relationship that would be affected by this bill. 

Every small business that faces the competitive squeeze from other 

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small businesses that aren’t legally compliant because of their relationships with other companies are going to be harmed by this bill. 

Mr. DESAULNIER. And I just -- one other aspect to that, Ms. Kennedy, one of the pressures I felt as I went longer in my restaurant 

career was disposable income. So this dynamic, and this race to the 

bottom, gives workers, consumers, less disposable income. So I always looked at the trade magazines to look at that in terms of 

housing costs, transportation, healthcare costs, because there’s less 

money for them to spend in the marketplace. 

And, Mr. Chairman, just in conclusion, maybe Mr. Rubin can add 

some comments to this. I did want to note that McDonald’s is still 

pending and was brought under the 1984 joint employee standard 

which was pre-BFI, if I’m correct. Mr. Rubin, you have any comments about that? 

Mr. RUBIN. Yes. And the facts of the case are very McDonald’s 

specific, as are the facts of other cases against McDonald’s. But, 

yes, it’s based on the old tried-and-true standard. 

Mr. DESAULNIER. Thank you. 

Thank you, Mr. Chairman. 

Chairman BYRNE. Thank you, Mr. DeSaulnier. 

The chair now recognizes the gentleman from Wisconsin, Mr. 

Grothman, for 5 minutes. 

Mr. GROTHMAN. Yes I’ll start with, Mr. Fasman. It’s kind of a difficult topic because you normally think small business is the backbone of America. And, of course, government, for a long time, has 

been waging a war on small business, trying to drive them out of 

business, just punish them. They hate them. But could you just -- 

in general, a lot of small businesses today are franchisees. 

Could you give me, in general, your opinion of what will happen 

to small businesses as this goes into effect? Will more of them be 

driven into becoming carpet stores and more employees be forced 

to work for large corporations? Will that be something that will 

happen in the long run? 

Mr. FASMAN. That is, of course, where this ultimately goes. If you 

are a large franchisor, and you’re found to be a joint employer with 

franchisees across the country, you may have thousands of collective bargaining agreements that you have to negotiate. And that’s 

untenable. So what do you do under those circumstances? Well, 

there are certain things you could do. But one of them is you could 

say, well, we won’t have franchise -- we won’t -- 

Mr. GROTHMAN. Become all carpet stores. 

Mr. FASMAN. Yeah. 

Mr. GROTHMAN. Just like we do in so many other industries -- 

Mr. FASMAN. Correct. 

Mr. GROTHMAN. -- the government will -- their hatred for the 

small businessman will be such they want everybody to have to 

work for a large corporation. That’s what’s going to happen. Right? 

Mr. FASMAN. Yes. I mean, that’s the logical thing to do is to say, 

look, we can’t do this, we can’t negotiate, you know, 3,000 franchise 

labor contracts. It’s just an impossibility. 

Mr. GROTHMAN. Not to mention you don’t want to be personally 

on the hook for what’s going on with somebody who you’re not supervising yourself. 

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Mr. FASMAN. Well, that is absolutely right. And that really is. 

That really goes back to what we’re talking about here. It’s hard 

for a business that has a contractual relationship with another 

business and says, look, you run all of these things, we don’t want 

-- as is the case with Ms. Kennedy -- you hire, you fire, you pay, 

and you’re responsible for this, to be told after the fact by a Federal 

agency, oh, but, by the way, you’re a joint employer because you 

have the potential to control that relationship. I mean, that just is 

-- that just makes no sense. 

The parties do this. And, you know, with all due respect to what 

I’ve heard today, companies do this not to evade the law. They do 

this because this is a legitimate and important business model in 

generating jobs throughout the United States. It’s not a nefarious 

way to get around paying employees what they’re entitled to under 

the law. 

Mr. GROTHMAN. Well, Ms. Kennedy, I’ll ask you. I guess you now 

own several Taco John’s. But you just probably started out with 

one? 

Ms. KENNEDY. Actually, I bought the company in 1999, and we 

started out with more restaurants than I have today. I started with 

14. I’m down to nine. 

Mr. GROTHMAN. Oh, okay. 

Ms. KENNEDY. Yeah. 

Mr. GROTHMAN. I’ll ask you, though, as somebody who is a 

franchisee. Would you feel you were a small business woman if, I 

guess, you lost control of the employer/employer relationship in 

which more and more of the employer/employer relationship -- assuming Taco John’s would allow you to continue to exist, would be 

directed from the corporate level? 

Ms. KENNEDY. In effect, it would make me a manager for them. 

If they are going to be responsible for employees that are technically my employees and my business, why would they want to 

carry all of that risk if they couldn’t direct every single action of 

those employees? And that’s really what is at odds here today, is 

that uncertainty over whether or not -- could they? Is it possible 

that they could take over control of my employees? Because they 

might be held responsible in the end for what they do. 

Mr. GROTHMAN. Now we’re looking at joint employer role today, 

Ms. Kennedy. But we sit on other committees. We deal with other 

sort of businesses. And this idea of hating small business, and forcing them into a position in which they ultimately have to get 

bought out by the big corporation, is something that we see in 

other areas, not just in the restaurant business. Do you know why 

the government hates small business? Could you take -- tries to 

drive them out of business? Could you maybe speculate as to why 

that is, why there are politicians who would be in favor of this 

rule? 

Ms. KENNEDY. I guess I can’t. I won’t speak for or to that. I can 

tell you from my perspective, though, that it’s easier to control the 

larger. 

Mr. GROTHMAN. Easier to control. Yeah. 

Ms. KENNEDY. Yeah. Yeah. 

Mr. GROTHMAN. Control the big business. Control the little guy. 

Ms. KENNEDY. Yeah. 

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Mr. GROTHMAN. You know, you lose touch, of course, with the 

local community. I’m sure you give money to the local charities and 

participate in those events. And, you know, once big Mr. -- nothing 

against Taco John’s, but big Mr. Taco John’s gets out there they’re 

not going to be helping out with the local float at the local parade 

or whatever. It’s a shame that so many people are trying to drive 

people like you out of business. It’s kind of a shame that the government is doing that. I guess my time is up. 

Chairman BYRNE. The time is up. Gentleman yields back. 

I now recognize myself for five minutes for questions. 

Mr. Fasman, we’ve heard today that there have been virtually no 

findings of joint liability for franchisors. And yet, there are press 

stories of investigations and cases regarding a number of brand 

name franchisors. And you mention the McDonald’s case. Is it accurate to say that franchisors and franchisees have no reason to 

worry under this BFI standard? 

Mr. FASMAN. Absolutely not. It is inaccurate to say that. And the 

reason to worry, of course, are the things that we’ve been talking 

about today when we’ve actually talked about the bill. The Browning-Ferris decision is, as I said, completely allows the labor board 

to come in and say, after the fact, you’re a joint employer based 

upon evidence that was not there, not on the way that you’ve run 

your business. So I would be remiss in not saying that this is a 

standard that all businesses, not only franchisors, but all businesses, should care about. 

And, Mr. Chairman, you’ve made it very clear, and said, that, 

you know, all you have to do is look at the McDonald’s prosecution 

on this, on this theory. And I don’t agree that the McDonald’s -- 

the McDonald’s prosecution was brought before Browning-Ferris. 

But I can virtually guarantee that the general counsel will argue 

that Browning-Ferris should apply under that ruling or in that 

case. So I don’t agree with the proposition that this has nothing to 

do with it. 

Chairman BYRNE. It seems to me that the game here is to get 

a favorable decision in the McDonald’s case and then use that as 

precedent to go after franchisor/franchisee relationships throughout 

the country, large, medium, and small. Would you agree? 

Mr. FASMAN. I agree with that. I think that that’s why it’s being 

brought. 

Chairman BYRNE. So would you agree with this assertion, that 

prior to Browning-Ferris that there was certainty under the National Labor Relations Act about who is and who is not a joint employer? 

Mr. FASMAN. Well, I think that there -- yes. I think that there 

was certainty in the sense that there was 30 years of history. All 

of these cases, as Mr. Rubin rightly points out, are fact-specific. 

But we at least knew what the standard was. I do not agree, by 

the way, that there was a common law standard for 46 years before 

that period of time that was applied under the National Labor Relations Act. I think -- I’ve read all those cases. 

And if one can figure out what the standard was, you’re better 

than I am, and a better lawyer than I am. Those cases were all 

over the place. And even the board said about its prior decisions 

that it was somewhat amorphous what test we used. 

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So this standard in 1984 brought clarity, brought certainty, balanced the rights of employees, employers, and labor unions, in an 

appropriate fashion. 

Chairman BYRNE. And what did the Browning-Ferris standard 

do to that clarity and that certainty? 

Mr. FASMAN. Well, it destroyed it. It destroyed it by introducing 

this after-the-fact, nonfactual, contrafactual possibilities about potential control and indirect control. It just threw everything into 

uncertainty. And it will literally take -- if this standard continues, 

it will literally take another 30 years to figure out what it means. 

Chairman BYRNE. As opposed to going back to the old standard 

under the bill that we’re talking about today and having that clarity and certainty that we had before. 

Mr. FASMAN. Yes. I agree, Mr. Chairman. 

Chairman BYRNE. Ms. Kennedy, the American Action Forum, 

Washington think tank, just released a study citing a downtrend 

in growth in the hotel industry, which is heavily reliant on franchises. This could be attributed to expanding the joint employer 

standards. Do you think a similar downturn could occur in the 

franchise restaurant industry based on expansion of the joint employer standards? 

Ms. KENNEDY. I do. I sit here today with that exact position. I 

am waiting before I start construction on another site. I just finished building one, got it open successfully in January, and now 

I’m on hold. 

I want to make sure that what I build is mine under all of the 

laws. And all of the history that I have, 33 years as a franchisee, 

or an employee of a franchisee, everything seemed like we were together in this idea of franchising. And now, with this, the question 

is out there: Will they be able to take over, in essence, my business, 

because they might be responsible for my employees? 

I’d like to point out, too -- and I’m reminded -- that there are 

hundreds of charges against franchises pending at the NLRB waiting on the McDonald’s decision. So it might be fair to say that 

there aren’t any today. That probably isn’t going to be the case 

once that decision is made. 

Chairman BYRNE. Thank you. 

And that comes to the conclusion of our question and answer. I 

would like to thank our witnesses for taking the time to testify before our subcommittee today. It was excellent testimony, got great 

information out there. 

I would ask unanimous consent to submit for the record a statement from the House Committee on Small Business, Chairman 

Chabot in support of H.R. 3441. Without objection, it will be entered in the record. 

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Chairman BYRNE. Mr. Takano, do you have any closing remarks? 

Mr. TAKANO. I do, Mr. Chairman. 

I would like to thank the witnesses for their testimony today. 

And particularly I want to thank Mr. Rubin from my home State 

of California for clarifying some things for us. 

And I just want to say that too many Americans can’t afford to 

buy a house, send their children to college, or save for retirement. 

It really should not be this way. American workers’ productivity 

has led to tremendous economic growth. 

But, unfortunately, the rules are written so that the economy delivers only for those at the very top. Here in Congress, we have the 

power to fix that. Unfortunately, we seem to have our priorities 

mixed up. We have held numerous hearings on how to undermine 

our nation’s unions and fundamental labor protections. If we spent 

the same amount of time, in this committee, working towards 

building up our nation’s workforce as we have spent on destroying 

unions, I believe we could have come together on a bill to dramatically scale up investments in our nation’s workforce through registered apprenticeship programs. 

H.R. 3441 is not a good deal for small business owners or small 

franchises. And it’s an even worse bill for workers. I hope we can 

work together to refocus our priorities, to support and strengthen 

the rights of our working people in our modern economy. 

Mr. Chairman, at this time I would like to ask unanimous consent to insert into the record the slides that Mr. Norcross and I referenced in our opening statements. 

Chairman BYRNE. Without objection, so ordered. 

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Mr. TAKANO. And I’d also like to ask unanimous consent to insert 

two letters opposing H.R. 3441 from the AFL-CIO, and the other, 

collectively, from the Teamsters, SEIU, UAW, UFW, UFCW, and 

the USW. 

Chairman BYRNE. Without objection, so ordered. 

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Mr. TAKANO. Thank you, Mr. Chairman. And that concludes my 

closing statement. 

Chairman BYRNE. Thank you, Mr. Takano. 

Well, this has been very useful and helpful, I think, both to the 

committee and to the House as we consider this particular piece of 

legislation. 

What’s really going on here is this is a game. I think we all understand what the game is here. You just heard the two letters 

that were entered into the record from the largest labor unions in 

America. It’s an effort by the labor unions to try to organize where 

they haven’t been able to organize before. And it’s a very calculated 

game. It started with the Browning-Ferris decision, but certainly 

the Browning-Ferris decision is going to be used, is being used 

today in the McDonanld’s case to try to get precedent to use to 

come in and interfere with the employment relationship of small 

businesses. 

Let me make this very clear. This is going to hurt small businesses. I don’t hear from big businesses about this. Big businesses 

have lawyers, and accountants, and all those people to take care 

of them. 

I hear from people like Mr. MacDonald and Ms. Kennedy from 

my district and all over America. And they know that this is going 

to hurt them. More importantly, they know what’s going to hurt 

their employees. This is not about the employees of small businesses or the small businesses in America. This is about the big 

labor unions in America trying to find a way to try to claw themselves back into the position they were in years ago. 

Labor unions have continued to lose their percentage of American workers that they represent even after 8 years of a very favorable administration. And this is one more effort that’s their attempt to try to get back into some sort of position of strength in 

America. 

I would assert the only way they can get back in strength is by 

changing their model, not by interrupting or interfering with a 

model that’s worked for small businesses and the employees of 

small businesses throughout America. 

So I think, if anything, the testimony we’ve heard today has underscored the need for this piece of legislation. I will say to my colleagues that I have open ears and open minds. If they have some 

suggestions they want to make to me about changes they think 

that would improve it, I’m happy to listen. 

But based upon what I’ve heard today, it simply has underscored 

what I’ve been hearing for months now, which is that we desperately need to pass this law, get certainty and clarity back into 

that employment relationship, and help small businesses throughout America. 

There being no further business, the subcommittees stand adjourned. 

[Additional submission by Mr. Takano follows:] 

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[Whereupon, at 12:20 p.m., the subcommittees were adjourned.] 

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