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Labor Department’s ‘Joint Employer’ Rule Cleared by White House

Dec. 23, 2019, 11:11 AM

The Labor Department’s final rule to limit shared wage-and-hour liability for companies in franchise, staffing, and other contract arrangements cleared White House review over the weekend, teeing it up for imminent release.

By removing the rule from its list of regulations under review, the White House Office of Information and Regulatory Affairs signals that the department could now publish it in the Federal Register as soon as this week. A DOL spokesman didn’t provide a precise update on anticipated timing.

The regulation, a long-standing priority of the business community, would update the department’s interpretation of “joint employer” liability to narrow the circumstances under which businesses, such as a franchiser and its franchisees, can be considered to jointly employer a group of workers. The rule draws support from large companies like McDonald’s Corp. that want to avoid legal risk when their affiliated businesses are accused of shorting workers on overtime pay or minimum wages.

Under a proposed version of the DOL rule issued in April, the Wage and Hour Division said it would weigh four factors to determine whether one company is a joint employer of another company’s workers: the ability to hire and fire; to supervise and control schedules; to set pay rates; and to maintain employment records. The proposal said all four factors would be considered collectively.

The agency has reviewed nearly 60,000 public comments on the rule. The feedback is intended to inform updates in the final version.

The administration’s new interpretation will also influence debate over whether companies should be required to bargain with workers provided by a staffing firm. It comes as the National Labor Relations Board is also moving to finalize a proposal to similarly limit shared responsibility for collective bargaining and unfair labor practice purposes.

Critics say the new approach will allow large companies that often dictate terms and conditions on subcontractor and franchisee workers to avoid responsibility when those employees are not properly paid. Some worker advocates are arguing that the DOL doesn’t have the authority to address the issue via regulation and that the rule should not be considered persuasive in court.

To contact the reporter on this story: Ben Penn in Washington at bpenn@bloomberglaw.com

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