Labor Department rescinds Obama-era guidance on joint-employers

Labor Department rescinds Obama-era guidance on joint-employers
© Keren Carrion

Labor Secretary Alexander Acosta on Wednesday rescinded Obama-era guidance that defines a "joint-employer."

The informal guidance was similar to a 2015 National Labor Relations Board (NLRB) ruling now being challenged in court, but impacted different laws.

NLRB considers a company jointly liable for its contractors' compliance with the National Labor Relations Act, which gives employees the right to unionize, if they have “indirect” control over the terms and conditions of employment or have the “reserved authority to do so.”

The Obama administration considered a company jointly liable for complying with the Fair Labor Standards Act -- the primary federal law governing minimum wages and overtime pay -- and the Migrant and Seasonal Agricultural Worker Protection Act when two or more employers jointly employed an employee. The employee’s hours worked for all of the joint employers during the workweek were to be aggregated and considered as one employment, including for the purposes of calculating overtime pay.

Acosta’s decision to rescind that guidance was welcomed by business groups, who have long argued that the NLRB and the Obama administration created a confusing patchwork of rules and regulations that made it impossible for companies to know whether they should be following the labor board’s decision or the administration's interpretation.

“There’s nothing more basic in trying to figure out what your approach should be to compliance with labor laws than figuring out who the employer and employee is,” said Michael Lotito, who co-chairs the Workplace Policy Institute at Littler Mendelson PC.

The International Franchise Association (IFA) said the new standards have 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 undue this costly regulation created by the previous administration,” Matt Haller, IFA’s vice president of public affairs, said in a statement. “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.”

The Department of Labor (DOL) also rescinded Obama-era guidance on independent contractors on Wednesday. In that guidance, the agency said it considered most workers to be employees under the Fair Labor Standards Act and it was likely to apply a very broad definition when investigating a company's practices, CNN Money reported at the time.

In a brief release, DOL said the removal of the administration interpretations does not change the legal responsibilities of employers under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act.

“The department will continue to fully and fairly enforce all laws within its jurisdiction,” the agency said.

The Labor Department has deleted the Obama-era guidance from it's website. The new department announcement was a paragraph long and does not detail the previous guidance. 

Supporters of the new joint-employer standards called the administration’s decision disappointing.  

In a statement, Christine Owens, executive director of the National Employment Law Project, said the guidance was issued to provide concrete compliance assistance to employers and workers alike about their rights and responsibilities under federal minimum wage law.

“But rescinding these documents doesn’t change the court decisions that they cite, nor anyone’s rights or responsibilities under the law,” she said. 

“All it does is show the Trump Administration’s willingness to take symbolic steps to attack workers – here, at the expense of additional clarity for all parties.”

—This report was updated at 2:22 p.m.