DOL Withdraws Joint Employer Guidance

Last week the Department of Labor (DOL) took a first step to rolling back one of the Obama administration’s harmful labor regulations. Labor Secretary Alexander Acosta announced the Department’s withdrawal of the previous administration’s “informal guidance on joint employment.

Prior to 2015, the Department of Labor considered a business a joint employer only if it exercised “direct and immediate” control over another company’s employees. Obama expanded this standard to include businesses that have “potential,” “indirect,” or “unexercised” control over another company’s employees.

Take a look at the franchise model. A small business owner purchases the rights to use the McDonald’s brand and meet basic standards, but runs the business independently, hiring and firing workers and setting wages as they see fit.

The Obama standard establishes McDonald’s corporation as a joint employer of the franchise employee, making the corporation equally responsible as the franchise for employees it has no direct role in hiring or supervising-essentially ending the franchise’s business model.

The ability of a business owner to independently operate a franchise as they see fit disappears when the corporation is now liable for every labor decision. The corporation standards, not the flexibility inherent to franchises, slows growth and job creation.

While the Trump Administration has rescinded this guidance at the department level, a 2015 National Labor Relations Board (NLRB) decision-that adheres to the Obama era standard- still stands.

The NLRB all but admitted the decision aims to empower unions’ collective bargaining efforts. For unions, it’s easier to target a few large firms, than hundreds of small-business franchises across the country.

This move signals the Trump administrations break fromObama-era regulations that favor unions at the expense of the economy, business owners, and employees. Congress can also take steps to hold unions accountable and protect the employees they represent by passing the Employee Rights Act.

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