In a move that has far-reaching impact for the restaurant franchise landscape, the Department of Labor has withdrawn the 2015 and 2016 informal guidance on joint employment and independent contractors.
“The National Restaurant Association applauds Secretary Acosta for withdrawing this internal guidance," Shannon Meade, Director of Labor and Workforce Policy, National Restaurant Association, responded in a statement."This is a positive step in the right direction. However, we will continue to work with the Department of Labor as well as Congress on the previous administration’s controversial joint employer standard.”
U.S. Secretary of Labor Alexander Acosta added that 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, he noted.
Guidelines released in January 2016 by the Labor Department’s Wage and Hour Division set a broader definition of what could be considered a joint employer. An August 2015 ruling involving the waste management company Browning Ferris Industries and staffing agency Leadpoint Business Services, the National Labor Relations Board (NLRB) said a company could be considered a joint employer even if it had only indirect or unexercised control. In a separate case, the NLRB said McDonald’s could be considered a joint employer with its restaurant franchisees. Under guidelines followed for more than 30 years before the ruling, the NLRB held that a company had to have direct control over the actions of a subcontractor or franchisee’s employees in order to be considered a joint employer.
The National Retail Federation, the world’s largest retail trade association, representing discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and Internet retailers from the United States and more than 45 countries, also welcomed the announcement saying the “burdensome guidance issued under the Obama Administration significantly broadening the definition of a joint employer and creating seemingly limitless liability in business to business relationships.”
“Today’s announcement from the Labor Department is an important first step in reversing one of the most onerous regulations imposed by the previous administration on businesses,” NRF President and CEO Matthew Shay said in a statement. “Drastically expanding joint employer liability to hold one business responsible for the actions of another independent business, such as a subcontractor or franchisee, did nothing to protect employees and only created uncertainty that led to more growth-chilling litigation. Retailers hope Congress will build on this progress and put the issue to rest once and for all with clear, fair legislation defining joint employers.”