April 1, 2019 Sophie Weiner Splinter
The Labor Department announced a proposal today that would limit the ability of workers to sue big companies for violations made by franchises or contractors, according to the New York Times. This would affect workers who fall under the category of joint employment, in which more than one company directly or indirectly controls their working conditions.
The new regulation would make it harder for workers to sue companies like McDonalds for failing to comply with laws like those governing minimum wage or overtime pay. Instead, they’d be forced to sue the individual franchise. “This proposal will reduce uncertainty over joint employer status and clarify for workers who is responsible for their employment protections,” labor secretary Alexander Acosta said in a statement. Whatever Acosta says, the reasons for this rollback are pretty obvious. Clearly, it’s harder to extract money from your local franchise for violating your labor rights than it is to get a settlement from an international corporation. This should make big companies happy.
In 2016, the Obama administration tried to help franchise workers by implementing regulations that would hold big companies accountable for the violations of their franchisees and contractors. Under the Obama-era regulations, a company like Dunkin’ Donuts would be liable for wage theft committed by a franchisee, even if the company didn’t directly supervise staff. Providing tools like software or creating policies for the franchisees was enough to prove the companies exerted control over the workplace.
Now, Acosta and Trump are veering back in the other direction.
From the Times:
The new proposal substantially restricts the situations in which a franchiser like McDonald’s would be considered liable. In an example laid out by the Labor Department, a global hotel brand would not be held liable for minimum-wage and overtime violations that a local franchisee committed, even if the franchisee relied on a variety of material provided by the hotel chain, such as sample employment applications and sample employee handbooks.
“Through this proposal, the Department of Labor has the chance to undo one of the most harmful regulatory actions from the past administration and replace it with a rule that creates certainty for America’s 733,000 franchise businesses,” International Franchise Association senior vice president Matthew Haller said in a statement. “An expanded joint employer standard has held back tens of billions of dollars in economic output each year due to a proliferation of frivolous lawsuits, precipitating significant changes to the way franchise brands interact with their local owners.”
Unsurprisingly, those who aren’t part of the International Franchise Association have a less positive view of this new proposal. Some say it gives companies a guide to avoiding wage theft lawsuits.
“It has provided such an obvious road map for employers to evade liability,” Sharon Block, a former Obama Labor Department official, now the executive director of the Labor and Worklife Program at Harvard Law School, told the Times. “But that’s going to introduce tremendous uncertainty into the lives of American workers who are subject to these business models.”
Block says that like almost every Trump administration change, this proposal is likely to be challenged by the courts as it goes into effect, after a 60 day commend period. Courts may still decide to disregard it when hearing lawsuits.
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