The National Labor Relations Board’s recent ruling reverting the standard for joint-employer status is a win for the hotel industry, but the predicament demonstrates how quickly things can turn on a political whim.
On 14 December, the National Labor Relations Board (NLRB) unexpectedly announced a return to the historical definition of joint employer, a decision that restored decades of legal precedent.
In overturning the Browning-Ferris decision, the NLRB brought both clarity and stability to the hospitality industry and the successful franchise model. Just as easily as the Obama administration turned the joint-employer doctrine into an existential threat to the hospitality industry and created waves of uncertainty, common sense was restored.
While the reversal is a welcome change for hoteliers, it is a reminder of how easily unelected and unaccountable federal panels can make big policy changes, seemingly on a whim. Fortunately, a bipartisan group of lawmakers in Washington see the error in this as it pertains to joint-employer doctrine and is working on a fix.
The National Labor Relations Board is an unelected federal panel charged with overseeing labor disputes. In a 2015 decision, the board significantly expanded the legal standard for two entities to be considered joint employers of a worker.
Common sense—and decades of legal precedent—dictate that an employer is responsible for only the employees they directly control. In a hotel franchise, like tens of thousands of AAHOA members, that meant the individual owner or ownership group was responsible for their workers. When it came time to raise wages, promote star employees or hire new workers, the franchisee is and was responsible.
If such a relationship arose that an entity other than the owner was making those decisions, or directing the owner to make those decisions, that would rightly be considered a joint-employment relationship. The two would together be legally responsible for the employees.
That system is clear and concise for both employers and employees. It is a legal bright line.
But when the Obama-era NLRB decided to weigh in on a labor dispute involving the waste management company Browning-Ferris Industries and a staffing company, they upended the traditional joint-employer standard—direct and exercised control over an employee—in favor of an unclear and expansive standard of indirect or unexercised control.
The new standard was as clear as mud but had crystal clear impacts on the hotel industry. American Action Forum, a self-described center-right policy think tank, reported that since the Browning-Ferris decision, job growth in franchised hotels plummeted by more than 77%. With more than 650,000 hotel employees working in franchised locations, nearly 10,000 jobs were not created as a result of this misguided decision.
The policy-thinkers on the right are not alone in their concerns about the Browning-Ferris decision. Dane Stangler, director at the left-leaning Progressive Policy Institute, voiced his group’s concerns that the joint-employer decision will “raise barriers and drive out the smaller franchise operators, which is a huge entry point for entrepreneurs in this country.” Stangler argues that as labor policy becomes more complex, small operations will lack the resources to deftly navigate the law and inevitably make mistakes. If the Obama-era, expanded joint-employer standard stood, those mistakes would have cost both the franchisee and the franchisor.
Overturning the Browning-Ferris decision just two years after the NLRB threw the franchise business model into chaos, while great for America’s small businesses, demonstrates the need for even greater stability and clarity when it comes to things like the definition of joint employer. Industry cannot afford to be subjected to the whims of government panels whose makeup can change with each administration.
That’s why we are fortunate that lawmakers in Washington on both sides of the aisle recognize this and provided a legislative fix. In July, a group of lawmakers led by Rep. Bradley Byrne (R, Ala.), Rep. Virginia Foxx (R, N.C.), Rep. Henry Cuellar (D, Texas) and Rep. Luis Correa (D, Calif.) stood under the hot July sun in Washington to announce the Save Local Business Act. The bill, just a page long, sets into federal law the precedent of direct and exercised control over employees to be considered a joint employer.
These lawmakers pledged their efforts to seeing it pass the House, the Senate and signed into law by President Donald Trump. In an encouraging first step, the bill passed the House with bipartisan support on 7 November and was received in the Senate the next day. The successful efforts to bolster the bill’s bipartisan support are encouraging, yet the bill’s sponsors lack even a single sponsor in the Senate, let alone the 60 votes the upper chamber requires to proceed to a vote.
For the stability of the hotel industry, the joint-employer definition needs to be codified into law so that no future administration can change it without congressional approval. Please join our call to both sides of the aisle in Congress to pass the Save Local Business Act.
Chip Rogers is the president and CEO of AAHOA which has more than 17,000 members who own nearly one in every two hotels in the country.
The opinions expressed in this column do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Bloggers published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to comment or contact an editor with any questions or concerns.