The DOL's new 'Joint Employer' rule is about selecting the proper tool for the job

There’s an old cliché that “if the only tool you have is a hammer, every problem becomes a nail.” For years now, the hammer of labor law has been swung at every sort of nail imaginable.

Take, for instance, the Joint Employer rule that was finally returned to a clear and thoughtful form last week. The rule had worked well since 1958, even while America and its economy have changed drastically over the last 60 years. In fact, it worked so well that Congress and presidential administrations of both parties largely left it alone, that is, until recently.

In 2015, the Obama administration attempted to implement an “expanded joint employer standard” through sub-regulatory guidance, bypassing the formal process authorized by Congress. The executive branch can make new rules, such as this one, through an approved administrative procedure that gives the public notice and allows them to comment on what any changes should look like. Sadly, some recent presidential administrations have found that process too slow and burdensome for their liking.

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Through these actions, the DOL and the National Labor Relations Board imposed liability for paying the minimum wage, overtime, and other benefits on businesses that had an “indirect or potential” relationship to another business’s employees. Unfortunately, no one knew what “indirect” or “potential” control meant, and the lack of a public process prevented that clarification from being made before the new policy was put in place. As a result, the lines between franchisors and franchisees, contractors and subcontractors, and many other businesses were blurred. The combination of an overreaching executive branch and an overreaching federal judiciary created an expensive legal mess and stuck small businesses and workers with the bill.

That is why I was encouraged when the DOL withdrew the Obama administration’s sub-regulator guidance in 2017. I was even more encouraged when the DOL initiated a proper rulemaking under the Fair Labor Standards Act (FSLA) on the subject in April of 2019. The DOL’s new Joint Employer rule, which was released last week, is finally the right tool for the job.

This new rule went through that full process and modernized the standard for a modern workplace. The rule makes clear that if a business has responsibility for hiring and firing, responsibility for supervision, responsibility for payment rates and methods, and responsibility for employment records, then it is an employer. In other words, if you hire someone, set their salary, and set their hours, you’re that person’s employer. This standard is clear to regulators, more manageable to employers, and more fair to workers.

The DOL’s new Joint Employer rulemaking hammers out a clear rule that complies with the law and works for employers and employees. This hits the nail on the head.

Ken Paxton is the Attorney General of Texas.