US Secretary of Labor Alexander Acosta on Wednesday rescinded two pieces of informal guidance issued by the Obama administration last year concerning how the department defines “joint employers” and independent contractors, The Hill reports:
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. …
The Department of Labor (DOL) also rescinded Obama-era guidance on independent contractors on Wednesday.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 January 2016, the Obama Labor Department’s Wage and Hour Division issued an administrator’s interpretation declaring that it considered joint employer regulations applicable to both “vertical” joint employment (when one company hires another that hires an employee in turn) and “horizontal” arrangements “where the employee has employment relationships with two or more employers and the employers are sufficiently associated or related with respect to the employee such that they jointly employ the employee.”
Acosta had indicated in his confirmation hearing in March that he disagreed with the Obama administration’s interpretation, which he said threatened to draw franchising companies such as fast food chains into labor disputes involving their franchisees, and preferred the traditional definition of a joint employer.
Business groups including the National Restaurant Association and the International Franchise Association were pleased at Acosta’s decision, according to the Washington Examiner, but expressed hope that Congress would act to ensure that government agencies including the NLRB adopt a narrower standard for defining joint employers:
Despite the Labor Department’s reversal, the Obama-era standard can still be applied to businesses. The National Labor Relations Board, an independent agency that serves as the government’s main labor law enforcer, was the first agency to adopt the standard and has not rescinded its interpretation. President Trump has yet to pick nominees for the five-member board’s two open seats. Business groups said they would continue to push Congress to write the direct control standard into law.
Wednesday’s decision has no direct impact on laws or regulations, but BuzzFeed notes that it “will almost certainly affect the outcome of cases now before the National Labor Relations Board”:
Alex Passantino, former Acting Administrator of the Labor Department’s Wage and Hour Division, said that the shift will likely result in “the Department of Labor pursuing fewer cases at the national level, and more cases ending at the local level, without efforts to pursue up-chain to a corporate franchisor or upper tier contractor.”
He said that it signaled that the department under Trump will likely “give more respect to traditional business relationships than the previous administration.”