The Labor Department introduced a proposed regulation today that would make it harder to hold businesses jointly liable when their franchisees or contractors violate the Fair Labor Standards Act.
The DOL proposal would use a four-part test to determine whether a business is jointly liable under the 1938 law, which governs minimum wage and overtime. The test would weigh whether the business has the power to hire and fire; to supervise schedules and “conditions of employment”; to set pay, and to maintain employment records.
The proposal would weaken an Obama-era DOL guidance that said a business need have only indirect control over employees to be held jointly liable.
“The proposed changes would provide courts with a clearer method for determining joint employer status, promote greater uniformity among court decisions, and reduce litigation,” said Keith Sonderling, acting administrator for DOL’s Wage and Hour Division, in a written statement.
In a move certain to disappoint the business community, a federal appeals court today upheld an Obama-era test to determine whether the relationship between a business and the employees of its contractor or franchisee qualifies as joint employment.
The much-anticipated decision largely affirmed the NLRB’s 2015 Browning-Ferris ruling, which made it easier to classify a business a joint employer, jointly liable for any labor violations committed by a different business with which it’s affiliated.
A three-judge panel of the D.C. Circuit Court of Appeals split on the issue in an 80-page opinion that included a lengthy dissent.
The majority held that the board’s consideration of a business’s “right to control” over the worker in question had “deep roots in the common law.” The court also upheld the NLRB’s inclusion of “indirect control” in its test.
But the majority found the board’s chosen standard for indirect control was inconsistent with common law, and remanded the case for further consideration on that point.
The Trump administration has sought to roll back the Obama-era joint employment standard, which is opposed by franchisers. The administration published a proposed rule in September that would revert to the pre-Obama standard, which made it somewhat more difficult to hold franchisers liable for labor violations committed by franchisees.
The two judges who ruled in the majority were Obama appointees. Judge Arthur Randolph, an appointee of former President George H.W. Bush, issued a scathing dissent.
“The majority opinion misstates the common law, misframes the questions in the case, and adds to the uncertainty the board’s Browning-Ferris decision has generated,” he wrote.
Per POLITICO, the National Labor Relations Board will propose a joint employer rule on Friday that would reverse the Obama-era Browning-Ferris standard, handing a major win to businesses.
The proposed rule addresses the circumstances under which franchisors can be held liable for labor violations committed by franchisees and contractors. President Donald Trump’s NLRB sought to reverse Browning-Ferris last year, but its efforts were thwarted by ethics conflicts with one of Trump’s appointees, William Emanuel.
In a written statement, the board suggested that the proposal would revert to the pre-Obama standard.
“Under the proposed rule, an employer may be found to be a joint-employer of another employer’s employees only if it possesses and exercises substantial, direct and immediate control over the essential terms and conditions of employment and has done so in a manner that is not limited and routine,” the board said.
The board’s three Republican members favored the change, while Democrat Lauren McFerran dissented. The fifth seat remains vacant.