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Connecting the Joint Employer Proposed Rule with Small Business Reality

December 7, 2022 — Modern Economy Project

In some encouraging news last week, the independent federal agency dedicated to small businesses has taken action on real world concerns raised by our coalition.

The Small Business Administration (SBA) Office of Advocacy urged the National Labor Relations Board to reconsider its proposed rule that would expand the standard for determining joint-employer status, citing the potential costs of compliance for small businesses. This followed an open forum where the Modern Economy Project went on record to express concern about the overlooked cost to small businesses.

That’s why we are applauding the SBA for taking this action and wholeheartedly agree that the NLRB’s proposal does not take into account real world impacts. By expanding the definition of joint employment to include indirect or unexercised reserved control, small business employers who have no real world connection to the employee’s of other companies would be liable for those workers.

For example, a company doing business with another should be able to expect that its business partner and its employees are following the law. During the Covid-19 pandemic, it would be reasonable to expect that the company was following critical OSHA and local health and safety protocols. Similarly, a company that provides training to its business partners regarding the prevention of sexual or other unlawful workplace harassment should not have to run the risk that doing so might lead to a charge and litigation over whether it is a joint employer.

The Modern Economy Project strongly believes that policies should set standards of practice that will encourage and promote corporate values, which will ensure healthy corporate competition among the players and will improve business ethics and accountability on the part of employers.

Click HERE to read the full comments that our coalition submitted to the NLRB regarding the proposed rule.

We are heartened to see that the SBA Office of Advocacy listened to our concerns and understands the implications of a proposed rule that is currently too broad and doesn't provide enough guidance for contracting parties on how to comply.

In its public comment letter to the NLRB, the SBA Office of Advocacy said that it is “concerned that the Board’s new joint employer standard is too ambiguous and broad, providing no guidance for contracting parties on how to comply or avoid liability.”

The SBA Office of Advocacy recommended that the NLRB “clarify and limit the types and degrees of indirect and reserved control that would now trigger joint-employment liability” and reassess the compliance costs of the proposed rule.

The Modern Economy Project is committed to ensuring that policies reflect our current economic reality. That is why we are submitting our own formal comment to NLRB on why we believe the proposed rule is unfortunately disconnected from the reality of America’s entrepreneurs.

As we wrote in our statement to the NLRB, we believe the joint employer standard established in the proposed rule “will result in significant confusion and uncertainty for the regulated community.”

We emphasized that these changes will “negatively impact diverse entrepreneurs and business owners who may not have the same networks or resources as non-diverse companies.” We are urging the NLRB to abandon the standard standard established in the proposed rule and affirm the current standard, which provides more certainty and ensures the correct entities are at the bargaining table when negotiating essential terms and conditions of employment.


MEP Notice of Proposed Rulemaking
Download PDF • 197KB

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