Small Business Welcomes Decision to Withdraw Joint Employer

Date: June 07, 2017

Franchisees and subcontractors relieved by Labor Secretary’s action on guidance that would hold companies liable for violations committed by other employers, says NFIB

For Immediate Release
Jack Mozloom, 202-406-4450 or 609-462-5610 (cell)

 

Washington, D.C. (June 7, 2017) – Secretary of Labor Alexander Acosta’s decision to scrap an Obama-era regulatory guidance that put companies at legal risk for workplace violations committed by subcontractors and franchisees is a win for small businesses, said the National Federation of Independent Business (NFIB) today.

“This is a victory for small firms that perform contract work for other companies,” said NFIB President and CEO Juanita Duggan. “Companies that could be held legally responsible for the actions of subcontractors may decide to bring those functions in-house.”

The Department of Labor under President Obama announced the joint employer guidance in 2015. While it is not a formal regulation, it has the same effect because it forces companies to rethink their relationships with other firms based on the risk.

The most obvious type of business under threat from joint employer are franchises, which are typically small businesses that operate independently of the parent company except for branding. However, the joint employer theory can apply to any business that contracts for services with other businesses. The Department of Labor announced today that it has withdrawn the joint employer rule.

“The danger for small businesses under the joint employer rule is that firms that hire subcontractors would consider the legal risk too great and discontinue those relationships,” said Duggan. “That’s a direct threat to small businesses that operate as subcontractors and franchisees.”

While the Secretary of Labor’s action today is progress, according to Duggan, small businesses won’t be out of the woods until the National Labor Relations Board (NLRB) reverses its controversial Browning-Ferris decision on joint employer or Congress acts to overturn it.

“The Secretary’s decision today is great news for small businesses but there is more work to be done,” she said.

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