The fast-food president is serving up another regulatory rollback for his favorite burger chains.
The Labor Department announced Monday that it plans to implement a new rule restricting the circumstances under which a company can be legally considered a joint employer. The proposed rule would be a boon to McDonald’s and other big companies whose restaurants tend to be operated by franchisees.
The Obama administration interpreted joint employer status in a way that could put the chains on the hook for labor violations at franchised stores ― a legal position that infuriated the fast-food industry, which argues that only franchisees should be liable. The Trump administration ditched that Obama guidance in 2017 and would now go a step further by writing a new rule.
Labor Secretary Alexander Acosta said in a statement that the proposal would “reduce uncertainty” and “clarify for workers who is responsible for their employment protections” ― that is, who is culpable if they haven’t been paid the minimum wage or overtime pay.
The measure would have to go through a public comment period before the administration may implement it. The administration’s plans were first reported by Bloomberg Law.
If it ends up on the books, judges would consider the rule as they evaluate the merits of wage theft lawsuits brought by workers. It would affect not only the fast food industry but also any one in which there is outsourcing or subcontracting and the lines of employment can get blurry, including the hospitality business, where the Trump family makes much of its money.
Under the proposal, there would be four factors to consider when determining whether a company qualifies as a joint employer: whether it can hire or fire the employee in question, controls the work schedule, sets the rate of pay or maintains the employment records.
Those criteria would be tighter than under the Obama administration, which took a broad reading of what it means to be an employer, so that a company that uses a temp firm, for instance, can’t dodge responsibility if workers don’t get paid for their work. The franchise lobby called the Obama administration’s wide interpretation of the law “one of the most costly and burdensome regulations” for its industry.
David Weil, who led the Labor Department’s wage and hour division under Obama, told HuffPost in 2016 that many companies use subcontracting and franchising arrangements to avoid accountability.
“What we’re trying to do is sort of rebuild — particularly in industries that employ low-wage, vulnerable workers — a foundation for basic labor standards by making people understand their fundamental responsibilities,” he said. “The real problems arise when people make business decisions hoping they can shift responsibilities to some other party.”
The Labor Department isn’t the only agency reversing Obama-era regulations on employment. The National Labor Relations Board, which referees disputes between unions and employers, has also moved to undo a broad reading of joint employment, drawing plaudits from business groups.
The NLRB issued a ruling in 2015 that could have paved the way for McDonald’s workers to band together even if they worked under different franchisees. But when the board fell under Republican control in 2017, the new majority issued a ruling overturning the rule set by Democratic members.