The Trump administration has updated a major labor regulation implemented during the Obama administration that was meant to benefit labor unions.
The Labor Department announced Sunday final updates to "joint employer" regulations, declaring that businesses should not be held liable for Fair Labor Standards Act violations, such as overtime pay and minimum wage, simply for being under the same corporate umbrella as a violating business.
According to the Washington Examiner, the Obama administration sought to implement joint employer regulations in such a way that benefited labor unions.
From the Examiner:
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.
However, under the rules announced Sunday, to meet joint employer status both businesses must:
- Be able to hire or fire the employee
- Control the employee's schedule and employment conditions
- Set the employee's wage
- Maintain the employee's employment records
This means that a corporation, like McDonald's for example, cannot be held liable for FLSA violations by a franchisee, which is legally a separate business entity.
The regulation update is meant to promote further economic growth, Secretary of Labor Eugene Scalia said in a statement.
"This final rule furthers President Trump's successful, government-wide effort to address regulations that hinder the American economy and to promote economic growth," Scalia explained. "By giving greater clarity to businesses who want to work together, we promote an entrepreneurial culture that has driven American prosperity for decades."
Wage and Hour Division Administrator Cheryl Stanton added, "The changes in this final rule break down barriers that keep companies from constructively overseeing, guiding and helping their business partners. For small business owners, and the employees working in those businesses, the relationship and the guidance coming from franchisors and other contracting companies can greatly improve the workplace and help them create jobs."