Labor Law: Feds Call Off Their War on Franchising and Subcontracting

Walter OlsonThe U.S. Department of Labor has announced afinal rule (press release,fact sheet,FAQ) backing off one of the Obama administration ’s mostdamaging initiatives, its attempt to redefine a wide range of franchise, subcontract, and supplier business models as “joint employment.” The effect of that move would have been to make many companies liable for breaches of labor and employment law committed by their franchisees or contractors. The final rule is set to take effect on March 16, 2020.This is an important win for economic freedom, as well as for the legal reality that a supply or contractual relationship between two firms is by no means the same thing as a merger between them.It is also a victory for regulatory modesty. The Obama rules hadpushed hard at (and arguably overstepped) the bounds of the New Deal-era Fair Labor Standards Act so as to rope in as employment  many relationships that Congress had never chosen to include as such. The push had been a multi-agency affair, extending to ostensibly independent federal bodies such as the National Labor Relations Board (NLRB) and others; and the retreat is likewise multi-agency, as can be seen in an NLRB case l ast month in which theboard confirmed that McDonald ’s does not, in fact, employ the employees of McDonald's franchisees.The new four-part balancing test announced by the Trump labor department assesses, toquote directly, whether the potential joint employer:* hires or fires the employee; * supervises ...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs