Labor Department to Limit Companies’ ‘Joint Employer’ Liability

The Labor Department today will roll out a proposal to shield franchisers and businesses that hire workers through staffing firms from liability for some minimum wage and overtime pay violations.

The DOL’s proposed regulation will update “joint employer” liability for minimum wage and overtime pay purposes. The department plans to weigh four factors—the ability to hire and fire, supervise and control schedules, set pay rates, and maintain employment records—to determine whether one company is a joint employer of another company’s workers, an official told Bloomberg Law.

The move marks the first “meaningful” update to joint employer liability since 1958, the official said. It’s meant to help businesses “ensure they clearly understand their responsibility to pay the federal minimum wage and overtime,” the official added

The proposal is another step back from an Obama-era approach to a controversial legal issue that’s entangled McDonald’s Corp. and Microsoft Corp., among others. The DOL and the National Labor Relations Board previously took an expansive view, saying that a company’s ability to indirectly control workers—even if that authority isn’t used—may be enough to establish joint employment.

Business lobbyists complain that makes companies potentially liable for workplace law violations against another business’s employees. Worker advocates say businesses often use complicated contract relationships to avoid pay, bargaining, and other responsibilities.

McDonald’s is the subject of ongoing NLRB litigation over whether the fast-food giant is a joint employer of franchise workers fired for participating in Fight for $15 demonstrations. Microsoft recently was embroiled in a debate over whether it’s required to bargain with software testers staffed by a third-party company.

The NLRB recently published a separate proposal to restrict joint employer liability for collective bargaining and unfair labor practices. The board generally would require a company to exercise direct control over workers to be considered their joint employer.

The proposed regulation’s potential impact isn’t clear. Some Labor Department officials say the DOL only has the authority to issue an “interpretive” rule that doesn’t have the same weight in court as other regulations.