Labor Secretary Alexander Acosta has struck down two Obama-era legal opinions that were meant to increase regulations over joint employers and businesses that use contracted labor. One of the legal opinions, rescinded on June 7th, broadened the definition of employee to include most freelance workers. Without that guidance, more workers could be defined as freelancers, which means the statutory power of the Fair Labor Standards Act could be severely diminished. The wages and hours of freelance workers are not protected under current federal statutes and regulations.
Joint Employer Doctrine
The second “informal guidance” – which was written in 2016 and based on a National Labor Review Board (NLRB) decision – widened the definition of joint employers to include two or more entities that handle matters concerning the terms and conditions of employment. Terms and conditions of employment could include wages, scheduling or hiring practices. Under this interpretation, it is more likely that a franchise parent company and a franchise would be categorized as joint employers.
Press Release
In a brief press release, the Labor Department indicated that it would be moving to a “direct control” standard. “U.S. Secretary of Labor Alexander Acosta today announced the withdrawal of the U.S. Department of Labor’s 2015 and 2016 informal guidance on joint employment and independent contractors. Removal of the administrator interpretations does not change the legal responsibilities of employers under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act, as reflected in the department’s long-standing regulations and case law.”
Before former Labor Secretary Tom Perez issued the 2015 and 2016 guidance, an entity could only be considered a joint employer if it exercised “direct control” over the workforce. When the Obama administration’s Labor Department changed its interpretation of the rule, employers who had indirect control over a workforce became subject to civil rights and employment statutes.
Opponents of the legal opinion argued that the “indirect control” standard was too ambiguous and created a situation where employers who didn’t directly oversee workplace conditions could be sued for liability claims.
Business Groups Rejoice
The move to revoke the two opinions counts as a big win for business groups who opposed the rules at their inception. Shannon Meade, director of labor and workforce policy for the National Restaurant Association, had this to say: “This is a positive step in the right direction. However, we will continue to work with the Department of Labor as well as Congress on the previous administration’s controversial joint employer standard.”
And Matt Haller, spokesman for the International Franchise Association, said this of Acosta’s decision: “While uncertainty surrounding the new joint employer standard has made it harder for America’s 733,000 franchise owners to grow and create new jobs, we are pleased the DOL is taking first steps to undo this costly regulation created by the previous administration. That being said, we urge Congress to now recognize the uncertainty and unreasonable costs the NLRB’s decision has placed on franchise owners and take action to find a true permanent solution.”
A Way Out
Though the DOL has cancelled the indirect control standard, businesses are not totally free from its regulatory reach. The NLRB – which originated the standard in the Browning-Ferris decision and which serves as the key agency in labor law enforcement – has not rescinded the joint employer doctrine. Trump has yet to pick nominees for the two vacant seats on the five-seat board, so it could be quite a while before the NLRB is in a position to revoke the rule.
Context
The DOL announcement came amidst a host of other potential game-changing policies. Last week, the House passed the Financial Choice Act, which would gut Dodd-Frank’s key provisions, including one responsible for the creation of the Consumer Financial Protection Bureau (CFPB). The CFPB is integral to overseeing the handling of financial products such as credit cards and mortgages.
Thus, the GOP government continues its efforts to roll back essential Obama-era protections for workers and consumers alike.
