Workers and businesses are thriving under the Trump economy. Friday's jobs report heralded nearly 200,000 new jobs, and the unemployment rate is an incredibly low 3.8%. The newest Department of Labor proposed rule should help workers and businesses even more and remove another Obama labor legacy.

The Department of Labor just announced this week a new rule for joint employer regulation.

Joint employers exist when workers have two employers who control their work schedules, wages, or hiring. For example, a company could request workers from a staffing agency, but the company controls the pay and work schedules of the employees. If two employers are joint employers, both companies could be sued for minimum wage and overtime violations under the Fair Labor Standards Act.

Liberals have been trying to expand the definition of joint employer for years and hold more businesses liable for indirect violations, which has created confusion and cost jobs and revenue.

Employers have been confused about who is a joint employer since Jan. 20, 2016, when the Department of Labor under President Barack Obama issued an administrator’s interpretation. Unlike the new proposed rule, the AI was not rule-making and did not have a notice and comment period. The administrator’s interpretation broadly defined joint employer:

In sum, the expansive definition of 'employ' as including 'to suffer or permit to work' rejected the common law control standard and ensures that the scope of employment relationships and joint employment under the FLSA and MSPA is as broad as possible.

However, Secretary of Labor Alexander Acosta announced on June 7, 2017, the withdrawal of the 2016 administrator’s interpretation.

Now, the Department of Labor has issued a new proposed rule, which introduces a clear four-question test that ends the confusion and reduces the number of lawsuits.

The test asks:



Does the potential joint employer hire or fire the employee? Does the potential joint employer supervise and control the employee’s work schedules or conditions of employment? Does the potential joint employer determine the employee’s rate and method of payment? Does the potential joint employer maintain the employee’s employment records?

The new rule also includes examples to help courts, employers, and workers determine who is a joint employer. For example, two restaurants that are part of the same franchise are not joint employers if they are managed by different franchisees. However, the restaurants could become joint employers if the restaurants coordinate on the worker’s schedule and jointly decide the terms and conditions of employment, e.g. pay rate. As Acosta correctly says:

This proposal will reduce uncertainty over joint employer status and clarify for workers who is responsible for their employment protections. Providing public notice and comment is the best way to move forward with another significant deregulatory proposal.

Interestingly, this DOL proposed rule follows the announcement of the National Labor Relations Board’s new proposed rule on joint employer under the National Labor Relations Act. The NLRB made this announcement on Sept. 13, 2018. The NLRB proposed a new rule in 2018 because the NLRB under Obama had expanded the definition of joint employer as well. The American Action Forum had estimated that the Obama-era NLRB rule would result in 1.7 million fewer jobs.

If implemented, both rules will have a large and positive impact on the economy.

These rules would primarily affect franchises, and there are more than 733,000 franchises in the United States. This business model has created 7.6 million jobs and indirectly supported 13.3 million jobs. In addition, franchises directly account for $404.6 billion in GDP and indirectly account for $925.9 billion.

While the Obama administration tried to limit the franchise business model, the Trump administration welcomes the jobs and revenue they create.

Olivia Grady is senior fellow at the Center for Worker Freedom, a project of Americans for Tax Reform.