As mentioned in this year’s Top 100 report, we knew it would be interesting to see the effect a brand new government administration would have joint employment rulings that were issued in the past couple years. Recently, we got the biggest indication.
To review, in August 2015 the National Labor Relations Board passed a ruling that expanded its joint employer standard. The board ruled a company can be considered a joint employer if it exercises any control over working conditions or if it reserves the authority to do so. Previously, the standard for joint-employer was “direct and immediate” control.
Under the expanded joint employer definition, franchise corporate offices would be more responsible for working conditions at each of their franchise units. A setup that many in the industry felt undercut the premise of franchises being a system of single business owners where the corporate office is a hub of pooled information, not a participant in the day-to-day affairs of the unit businesses.
Over the past two years, franchise industry leaders, most prominently members of the International Franchise Association (IFA), have vocally denounced the decisions and taken actions to fight what they perceived to be an attack on the franchising model.
At the very least, it appears new U.S. Secretary of Labor Alexander Acosta agreed that the rulings were too broad in reach. Last week, Acosta withdrew the informal guidance from 2015 and an additional one that was made in 2016. The withdrawal reestablishes joint employment liability can only come with “direct control” over a worker’s situation.
The IFA celebrated the withdrawal stating in part, “Locally owned businesses deserve as much clarity and certainty as possible so they can continue to create jobs and serve their communities, and we are hopeful that this effort led by the [Department of Labor] will help produce that.”
However, the Department of Labor was sure to remind employers of their responsibility to workers in its release on the matter saying, “Removal of the administrator interpretations does not change the legal responsibilities of employers under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act, as reflected in the department’s long-standing regulations and case law. The department will continue to fully and fairly enforce all laws within its jurisdiction, including the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act.”