Trump admin reverses Obama-era rule on ‘joint-employer’ liability

President Donald Trump just dealt another blow to Barack Obama’s legacy.

According to the Washington Examiner, the president issued a new policy designed to limit the liability of corporations said to be “joint employers,” including franchisers like McDonald’s, for payment of their workers’ wages. President Obama implemented rules to expand the definition of “joint employers,” and business interests sought to reverse the changes, which they said were harmful to economic growth.

“By giving greater clarity to businesses who want to work together, we promote an entrepreneurial culture that has driven American prosperity for decades,” Labor Secretary Eugene Scalia said.

Trump reverses Obama policy

At issue in the policy change is the definition of a “joint employer,” the meaning of which affects the liability of franchisers like McDonald’s to franchise employees.  Labor unions supported Obama’s prior policy change as a victory for workers, but the Trump administration sought to redefine “joint employer” as part of a wider slash-and-burn agenda toward burdensome regulations.

The new Trump rule defines “joint employer” more stringently, using four criteria. Both companies must be able to hire or fire an employee, supervise or control work schedules, set pay rates, and maintain employment records.

A lawsuit brought against McDonald’s by the National Labor Relations Board was resolved in the corporation’s favor last year, with a federal appeals court ruling that the company wasn’t liable for the policies of its franchises. This occurred amid a pattern of divergent judicial opinions on the topic, which led to uncertainty among increasing numbers of franchise owners and third-party contractors alike.

Business advocates have hailed Trump’s rule change as a long-overdue correction of overzealous regulation that harmed franchises and other large enterprises that regularly enter into service contracts with other entities.

A press release from the Labor Department praised the new rule, which goes into effect in March, as the first meaningful update to its policies on the matter in 60 years. “The changes in this final rule break down barriers that keep companies from constructively overseeing, guiding, and helping their business partners,” said Labor Department Wage and Hour Division Administrator Cheryl Stanton.

Mixed reaction

While supporters have said that the rule will protect business and clarify confusion about corporate liability, critics have said that it will empower businesses to rip off their workers. The pro-union National Employment Law Project (NELP) condemned the policy for empowering “wage theft,” The Hill reported

“On Sunday, the U.S. Department of Labor announced a final rule that interprets the ‘joint employment’ standard in a way that makes it easier for corporations to cheat their workers and look the other way when workplace violations occur,” said Rebecca Dixon, executive director of the NELP, in a statement. “The DOL’s final interpretation dramatically and improperly narrows companies’ joint responsibility for respecting fair pay and child labor laws, exposing millions of workers to wage theft.”

President Trump has governed on an unconventional economic policy that combines old-school free-market economics — including a large corporate tax cut — with protectionist policies to shield American workers from globalized competition. The president is poised to claim victory when his renegotiated NAFTA trade deal, the United States–Mexico–Canada trade agreement, is fully ratified, a development which is expected any day now.

The rule change comes as Vermont Sen. Bernie Sanders, a hard-left economic populist, is said to be surging in Iowa, placing him on track to be a potential frontrunner for the Democrat nomination. Trump has pivoted to attacking Sanders in recent days, in a clear acknowledgment of his rising political prospects.

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