Trump administration rolls back Obama-era 'joint employer' rule
by Sean Higgins
| January 12, 2020 05:48 PM

The White House has rolled back one of the Obama administration's most ambitious attempts to rewrite federal labor law to benefit unions, the so-called "joint employer" rule.

The Trump administration on Sunday said that businesses shouldn't be held liable for violations by other companies if all they share is a corporate brand.

The Obama administration had sought to make franchiser corporations such as McDonald's legally responsible for workplace violations by their franchisees, even if the latter were legally independent businesses. The previous administration based this on the theory that a corporation was a joint employer with the other company, even if the former only had "indirect control" over the latter company's policies.

Trump administration officials have been working to roll back the joint employer rule since the president took office. The Labor Department on Sunday issued an official rule that corporations were only liable when they had "direct control" over the other company's policies. The administration clarified that to be joint employers, both businesses had to be able to: hire or fire employees; have control over their work schedules; control those workers' pay; and maintain their employment records.

"This final rule furthers President Trump’s successful, government-wide effort to address regulations that hinder the American economy and to promote economic growth,” said Labor Secretary Eugene Scalia. The rule will go into effect in 60 days.

Business groups had staunchly opposed the Obama administration's effort, saying it would have pushed many corporations out of franchising altogether rather than risk the additional liability. Unions had cheered the Obama rule since it made corporations more vulnerable to pressure campaigns and organizing efforts.

The Trump administration said the last administration's "indirect control" standard was far too vague.

"The changes in this final rule break down barriers that keep companies from constructively overseeing, guiding, and helping their business partners,” said DOL Wage and Hour Division Administrator Cheryl Stanton.

The National Labor Relations Board, the main federal labor law enforcement agency, late last year settled a long-running joint employer case against McDonald's Corporation by announcing the company was not a joint employer with its franchise restaurants. The case had been launched in 2013 by the Obama administration.