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Battles lines are drawn on DOL joint-employer guidance

By Lisa Milam-Perez, J.D.

Reaction was swift, if not surprising, to DOL Wage and Hour Administrator David Weil’s latest bid to “un-fissure” the American workplace this week by issuing an Administrator’s Interpretation broadly defining joint employers under the FLSA and Migrant and Seasonal Agricultural Worker Protection Act.

Franchise association. The International Franchise Association, whose members are feeling the heat from stepped-up joint-employer enforcement initiatives like the ongoing McDonalds litigation before the NLRB, issued a statement on Wednesday, January 20, opposing the new guidelines.

“The new rulings would hold small business owners responsible for what they can’t control and unfairly blame one company for the mistakes of another,” said Matt Haller, the IFA’s Senior Vice President of Public Affairs. “IFA opposes any regulatory change that unwarrantedly holds franchisors responsible for their franchisees’ employees,” he said.

“For franchising, advancement of an ‘economic realities’ test is truly problematic. The brand protection and measures a franchisor takes should not provide the opening for WHD to attack brand companies or for trial lawyers to file unscrupulous lawsuits leveraging this new guidance in the courtroom.” Haller encouraged Congressional Republicans to “exercise their congressional oversight function to ensure small business owners are not unfairly targeted by overzealous regulators or trial lawyers.”

House Workforce Committee. The IFA needn’t have worried. Tim Walberg (R-MI), Chairman of the House Workforce Committee’s Workforce Protections Subcommittee, promptly issued a statement that day as well, lambasting the DOL “guidance”—which he took care to place in quotes.

“Once again the administration is pushing regulatory policies that will harm the workers and job creators they claim they want to help,” Walberg charged. “This is part of a larger effort that will threaten the livelihoods of small business owners and destroy opportunities for workers and entrepreneurs to succeed in today’s economy.”

Walberg contends that the administration “insists on imposing outdated policies” that are deterring individuals from starting their own businesses and shaping an “innovative 21st century workforce.” He placed the Administrator’s Interpretation within the larger context of the administration’s ongoing efforts “to redefine what it means to be an employer,” citing the NLRB’s recent Browning-Ferris decision as well as the ongoing McDonald’s case before the labor board.

Inter-agency dealings? Walberg also revisited the controversy swirling around OSHA’s intimations that it would look more closely at joint-employer relationships as well—and reinvigorated the committee’s inquiry into whether the agencies had improperly colluded on the issue. Committee members were apparently displeased with the DOL’s half-hearted response to the OSHA inquiry into inter-agency machinations. More recently, the committee obtained new information calling into question the DOL’s previous assurances to the contrary, including emails between DOL and NLRB officials agreeing to “compare notes” on their joint employer policies. That prompted the committee to issue another letter to Labor Secretary Thomas Perez renewing its request for information on OSHA’s “troubling” joint employer proposal.

A thumbs-up. Employee advocates heaped praise on the latest directive from the DOL. According to National Employment Law Project Executive Director Christine Owens, the Administrator’s Interpretation “provides clear and timely guidance to employers, workers, and courts seeking to ensure that employers, regardless of their business structures, abide by our nation’s baseline labor protections, such as minimum wage and overtime.

“As the AI rightly points out, ‘where joint employment exists, one employer may also be larger and more established, with a greater ability to implement policy or systemic changes to ensure compliance.’ In such situations, recognizing that businesses are joint employers is essential ‘to achieve statutory coverage, financial recovery, and future compliance, and to hold all responsible parties accountable for their legal obligations,’” Owens said, in a statement released in response to the DOL issuance.

“The guidance is chock-full of modern workplace examples where two or more companies may be found to jointly employ workers,” NELP said, and “provides a timely reminder to companies that while they are free to insert intermediaries or subcontractors into their business models, they cannot outsource their responsibility for the workers in their businesses.”

NELP added that the latest Administrator’s Interpretation, coming six months after the WHD guidance on independent contractor misclassification, “is another important step in ensuring that the scope of the Fair Labor Standards Act is as broad as possible.”