The White House has formally rolled back one of the Obama administration’s most ambitious attempts to rewrite federal labor law to benefit unions, the so-called joint employer rule.
The Trump administration on Sunday said that businesses shouldn’t be held liable for violations by other companies if all they share is a corporate brand.
The Obama administration had sought to make franchiser corporations such as McDonald’s legally responsible for workplace violations by their franchisees, even if the latter were legally independent businesses. The previous administration based this on the theory that a corporation was a “joint employer” with the other company even if the former only had “indirect control” over the latter company’s policies.
Trump administration has been working to roll back the “joint employer” rule since President Trump took office. The Labor Department on Sunday issued an official rule that corporations were only liable when they had “direct control” over the other company’s policies. The administration clarified that to be joint employers, both businesses had to be able to: hire or fire an employee; have control over their work schedule; control the workers’ pay; and maintain the workers’ employment records.
“This final rule furthers President Trump’s successful, government-wide effort to address regulations that hinder the American economy and to promote economic growth,” said Labor Secretary Eugene Scalia. The rule will go into effect in 60 days.
Business groups had staunchly opposed the Obama administration effort, saying it would push many corporations out of franchising altogether rather than risk the additional liability. Unions had cheered the Obama rule since it made corporations more vulnerable to pressure campaigns and organizing efforts.
The Trump administration said the Obama administration’s “indirect control” standard was far too vague.
“The changes in this final rule break down barriers that keep companies from constructively overseeing, guiding, and helping their business partners,” said DOL Wage and Hour Division Administrator Cheryl Stanton.
The National Labor Relations Board, the main federal labor law enforcement agency, late last year, settled a long-running “joint employer” case against McDonald’s Corporation by announcing the company was not a joint employer with its franchise restaurants. The case had been launched in 2013 by the Obama administration.