On Wednesday, Labor Secretary Alexander Acosta rescinded the Department of Labor’s (DOL) joint employer rule that was put in place during the previous administration. The rule, which is similar to a 2015 National Labor Relations Board (NLRB) ruling, had drawn criticism over the regulatory confusion it created.
The NLRB’s ruling said that companies were jointly liable for their contractors’ adherence to the National Labor Relations Act, while the DOL regulations rescinded this week found companies jointly liable in their compliance with the Fair Labor Standards Act and the Migrant Seasonal Agricultural Worker Protection Act. Business groups’ criticisms of the rulings noted that the NLRB and DOL’s differing interpretations of what constituted a “joint employer” had left businesses unclear on how to apply the rules and regulations.
“Wednesday’s rescission makes sense,” says Greg Muzzillo, founder of industry distributor Proforma. “Previous far-reaching guidelines would have destroyed franchising as we know it, changing the way thousands of small businesses operate, and overturning years of established law in the franchising industry. The franchise system creates economic opportunities and income for thousands of business owners who might not have that opportunity under another model. Franchising is a proven model for those with an entrepreneurial spirit. Defining franchisors and franchisees ‘joint employers’ would have chiseled away at the independence under which these small-business risktakers thrive, causing a decline in the number of new franchises over time.”
In a statement, the International Franchise Association says that it applauds the DOL’s decision “as unlimited joint employer liability is one of the most costly and burdensome regulations impacting the franchise business model.” The IFA Vice President of Public Affairs Matt Haller adds, “While uncertainty surrounding the new joint employer standard has made it harder for America’s 733,000 franchise owners to grow and create new jobs, we are pleased the DOL is taking the first steps to undo this costly regulation created by the previous administration.”
