Department of Labor Dials Back Murky Joint-Employer Guidance


Brian Turner

As Michal Layman, the VP of Federal Government Relations at the IFA points out, the past few years of joint-employer news has been “bad, bad and more bad.” But a new note is a small step toward clarity on the issue.

Joint-employer concerns, of course, ramped up over the past few years with landmark cases and legal notes further linking franchise operations and franchisors in labor disputes. But as of Wednesday, a new note from Department of Secretary of Labor Alexander Acosta shows that the Trump Administration is paying attention to the issue, in a very short press release.

“U.S. Secretary of Labor Alexander Acosta today announced the withdrawal of the U.S. Department of Labor’s 2015 and 2016 informal guidance on joint employment and independent contractors,” began the release.

To the legal and lobbying bodies in the franchise world, that’s great news.

“Yesterday was really good; it’s a great indication that the Trump administration and Secretary of Labor Alexander Acosta have the joint employer issue and its impact on franchises high on their radar screen,” said Layman.

The guidance notes in question were 2015-1 and 2016-1.

The language in the 2015 guidance took an expansive view of independent contractors under the Fair Labor Standards Act (FLSA), stating that “most workers are employees under the FLSA.” That created a presumption of employment for all workers even under limited 1099 agreements.

In the 2016 guidance, the DOL had a similarly expansive take on defining joint employment under FLSA and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). In it the DOL guided that “joint employment, like employment generally, should be defined expansively under the FLSA and MSPA.” It also expanded the test for joint employment to a broader standard than previous common tests ensuring “that the scope of employment relationships and joint employment under the FLSA and MSPA is as broad as possible.”

While the statement does suggest a narrower focus for the DOL, isn’t exactly an elixir for the joint-employer ails across the industry.

“The rollback by the administration is a positive step but a modest one. Any interpretation like that doesn’t have the force of law, but is indication of the enforcing agency is going to take,” said Layman. “But the reason yesterday was a modest move is that joint employer really began at the NLRB not at the DOL.  Other organizations like the EEOC and OSHA have also inappropriately tried to tie franchisees and franchisors together.”

A legal bulletin from Faegre Baker Daniels, a firm with a longstanding franchise practice, echoed that sentiment. It pointed out language in the news release that read, “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 Fagre note emphasized that this small victory for, but franchised operations cannot disregard the law books quite yet.

“The withdrawal rescinds the guidance itself but does not alter any regulations or case law dealing with employee/independent contractor classification or joint employment,” read the bulletin. “Accordingly, employers must continue to be careful when entering into independent contractor arrangements or employee sharing/staffing arrangements—but the DOL’s decision signals that it may take a more pro-employer approach to these issues going forward.”

While it’s a positive step, Layman and just about every note from various legal firms called for actual legislation from Congress before franchises and franchisors can get some true clarity and harmony within the multiple agencies and laws that surround joint-employer concerns.

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