The House of Representatives, by a vote of 242-181, approved a bill that seeks to overturn a National Labor Relations Board ruling that redefined longstanding policies regarding joint employer status.

The Save Local Business Act was sponsored by Rep. Bradley Byrne (R-Ala.). The legislation now heads to the Senate.

Byrne serves as Chairman of the House Workforce Protections Subcommittee.

The legislation clarifies what constitutes a “joint employer” under federal labor law.

In August 2015, a ruling by the National Labor Relations Board abandoned 30 years of precedent by redefining and expanding the concept of “joint employer.” As a result, any company that relies on other businesses for contract labor, or uses a franchise business model for its operations, has much greater risk for labor conditions at those other businesses, even though the original company is a separate entity from those partners. Guidelines released in January 2016 by the Labor Department’s Wage and Hour Division codified the broader definition of what could be considered a joint employer.

Since 1984, the NLRB had recognized companies as independent from the businesses with whom they contract when labor disputes arise, so long as they didn’t share direct and immediate control over terms and conditions of employment. Companies that merely possessed the ability to exercise control without actually doing so were not considered a “joint employer.”

That standard changed with an NLRB ruling against a unit of Browning-Ferris Industries of California. Under its new standard, the NLRB deems companies to be a joint employer if they exercise “indirect control” over terms and conditions of employment and where they merely have the right to exercise that control. The NLRB held that the new standard would apply retroactively.

The ruling, not industry-specific, covers every company that contracts out for services rendered by those who are not the company’s own employees. It means, for example, that the headquarters of a fast food chain could be held liable for the unfair labor practices of an otherwise independent franchisee.

In a brief statement on June 7, Secretary of Labor Alexander Acosta announced “the withdrawal of the U.S. Department of Labor’s 2015 and 2016 informal guidance on joint employment and independent contractors.”

The statement was music to the ears of franchised businesses, restaurant chains, and retailers embroiled in lawsuits over who is, or is not, technically an employee.

“For a few years now, I’ve visited local businesses and heard concerns about how the joint employer scheme creates confusion and uncertainty for workers and job creators. With this vote today, the House has shown we are listening to those concerns and doubling down on our commitment to protecting local businesses and their employees,” Byrne said, following the vote.

The bill earned support from multiple national organizations, including the Coalition to Save Local Business, the U.S. Chamber of Commerce, the International Franchise Association, the National Taxpayers Union, the National Retail Federation, the Workplace Fairness Institute, the American Hotel and Lodging Association, the National Restaurant Association, and more.

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