The Honorable Lauren M. McFerran, Chairman, National Labor Relations Board (December 7, 2023)

Summary

A letter dated December 7, 2023, from the House Committee on Small Business to Chairman McFerran of the National Labor Relations Board (NLRB), inquiring about the NLRB's recent rule change to the Standard for Determining Joint Employer Status. The letter says the change expands the joint-employer definition under the National Labor Relations Act by allowing a joint employer finding based solely on indirect and unexercised control, and that it appears the NLRB may not have properly considered small entities. It requests information no later than December 21, 2023, including answers on cost estimates and familiarization time. The signature block names Roger Williams, Pete Stauber, Dan Meuser, Mark Alford and Aaron Bean.

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                                            December 7, 2023

The Honorable Lauren M. McFerran
Chairman
National Labor Relations Board
1015 Half Street SE
Washington, DC 20570

Dear Chairman McFerran:

       The House Committee on Small Business (the Committee) writes to inquire about the
National Labor Relations Board’s (NLRB) recent rule change to the Standard for Determining
Joint Employer Status. This change expands the joint-employer definition under the National
Labor Relations Act (NLRA) by allowing a joint employer finding based solely on indirect and
unexercised control.1 Removing the current clear and predictable joint employer standards
prevents employers from predicting the risks and costs of their contracts with providers, vendors,
subcontractors, and franchisees.2 Beyond predictability, the rule expands liability to alleged joint
employers which will almost certainly increase costs. It appears that the NLRB may not have
properly considered small entities during this rulemaking process.

       It is important for agencies to examine small businesses interests, which make up 99.9
percent of all businesses in the United States, when passing any new rule. America’s small
businesses deserve to have their voices heard and considered. We therefore request the following
information as soon as possible but no later than December 21, 2023:

    1. The NLRB uses data derived from wage and benefit figures provided by the Department
       of Labors’ BLS to estimate costs for a legal counsel.3 Did the NLRB use an average wage
       for an attorney or an average billable rate to estimate the cost for a small business to hire
       a legal counsel to examine the new rule?

    2. The NLRB uses the same familiarization time estimate than in its previous rule.4
       However, this is a different rule with vaguer language and broader definition, thus, how
       did the NLRB reach the conclusion that the familiarization will only take an hour?


1
  Standard for Determining Joint Emp’r Status, 88 FR 73946 (2023) (to be codified at 29 C.F.R. 103).
2
  Mark G. Kisicki, et al., NLRB Casts Wider Joint-Employer Net With New Final Rule, OGLETREE DEAKINS (Oct 27,
2023).
3
  Joint Employer Status Under the National Labor Relations Act, 29 C.F.R. § 103 (2020).
4
  Id.
The Honorable Lauren M. McFerran
December 7, 2023
Page 2 of 3

    3. The NLRB dismisses commentators’ legitimate concern about the compliance costs for
       small entities if an entity is determined to be a joint employer under this new rule
       contrary to its previous status. The NLRB concludes that there are no other additional
       costs besides the familiarization costs. How did the NLRB come to this conclusion?

    4. What was the reasoning behind the NLRB’s decision to adopt this rule over other
       alternatives, especially considering its application to relationships involving a small entity
       (such as a franchisee) and a large enterprise (such as a franchisor) in which cases the
       small entity is likely to be at disadvantage?5

    5. Franchise business model is one of the most common ways to achieve American dream—
       especially for small entities.6 Did the NLRB consider alternatives not to disproportionally
       burden an industry that is dominated by small businesses?

    6. The rule states that the NLRB is “mindful that applying the final rule will require
       sensitivity to industry-specific norms and practices” and that it “will take any relevant
       industry-specific context into consideration when considering whether an entity is a joint
       employer.”7 What standards are applied by the NLRB when considering the industry-
       specific context?

    7. How does the NLRB define “indirect” control of an essential term and condition?

    8. This rule significantly increases bargaining responsibilities for small businesses.
       Considering this significant additional burden for small entities, how does the NLRB
       reason that this rule change is necessary to facilitate effective collective bargaining?

       To schedule the delivery of your response or ask any related follow-up questions, please
contact the Committee on Small Business Majority Staff at (202) 225-5821. The Committee on
Small Business has broad authority to investigate “problems of all types of small business” under
House Rule X. Thank you in advance for your cooperation with this inquiry.

                                             In God We Trust,




_________________________                                  _________________________
Roger Williams                                             Pete Stauber
Chairman                                                   Member
Committee on Small Business                                Committee on Small Business



5
  Id.
6
  Jarrett Dieterle, New Labor Rules Will Screw Over Your Local McDonalds, REASON (Nov. 15, 2023).
7
  Joint Employer Status Under the National Labor Relations Act, 29 C.F.R. § 103 (2020).
The Honorable Lauren M. McFerran
December 7, 2023
Page 3 of 3




_________________________                     _________________________
Dan Meuser                                    Mark Alford
Member                                        Member
Committee on Small Business                   Committee on Small Business




_________________________
Aaron Bean
Member
Committee on Small Business



cc:    The Honorable Nydia M. Velasquez, Ranking Member
       Committee on Small Business


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