In an effort to undo Obama-era worker protections, the U.S. House of Representatives recently passed a bill along party lines to significantly limit joint employer liability. If it becomes law, employees will be left with fewer remedies for violations of federal wage and hour laws.

The bill, called the “Save Local Business Act,” passed the House 242-181 on November 7, 2017. It would amend the National Labor Relations Act and the Fair Labor Standards Act to make a company jointly liable for a business partner’s labor law violations only if the company had “direct control” of their business partner’s employees.

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This new standard will make it more difficult for employees to establish that a large company which oversees a project or their work should be held accountable for depriving those employees of required wages and other protections. Indeed, Democrats who opposed the bill argued that it gives unscrupulous companies a license to steal wages, withhold overtime pay, and break child labor laws.

Christie Owens, the executive director of the National Employment Law Project, shared those concerns, stating that “[w]orkers and local businesses are on the losing end of today’s vote. The winners are the large corporations and their lobbyists and trade associations who already enjoy outsized power over the economy and the workplace, and whose contributions line the campaign coffers of the House members who voted for this bill.”

If the bill becomes law, companies will have a better chance of avoiding liability for violations by their subcontractors. It also increases the risk that employers could establish strawman subcontractors for the express purpose of shielding themselves from exposure for wage and hour violations.

For small businesses, this legislation would likely result in their being solely on the hook for labor law violations even if the business practices which got them into trouble were directed or influenced by a larger corporation.

Charles Ash, IV

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Charles Ash, IV

Charles R. Ash, IV is a Shareholder in Sommers Schwartz’s Complex Litigation groups. A substantial portion of Rob’s practice is devoted to collective and class actions arising under the Fair Labor Standards Act (FLSA) and similar state laws.

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