La­bor Dept. al­ters ‘joint em­ployer’ stan­dard

Baltimore Sun - - BUSINESS - By Christo­pher Ru­gaber

WASH­ING­TON — The La­bor Depart­ment is­sued a fi­nal rule Sun­day that clar­i­fies when a worker is em­ployed by more than one com­pany, an is­sue that af­fects fran­chise busi­nesses such as McDon­ald’s and firms that have out­sourced ser­vices such as clean­ing and main­te­nance.

The rule, first pro­posed last spring, re­places an Obama ad­min­is­tra­tion pol­icy that po­ten­tially made more busi­nesses li­able for fail­ures by fran­chisees or con­trac­tors to pay over­time or min­i­mum wages.

The new rule, which will take ef­fect March 16, pro­vides a four-part test to de­ter­mine whether a com­pany is a “joint em­ployer.”

The tests are: whether or not it can hire or fire the em­ployee; whether it su­per­vises the em­ployee’s work sched­ule; whether it sets their pay; and if it main­tains their em­ploy­ment records.

Not all tests need to be met to es­tab­lish that a busi­ness is an em­ployer, nor does the busi­ness model fol­lowed by a com­pany de­ter­mine whether it is an em­ployer, a se­nior of­fi­cial from the La­bor Depart­ment said.

“This fi­nal rule fur­thers Pres­i­dent (Donald) Trump’s suc­cess­ful, gov­ern­men­twide ef­fort to ad­dress reg­u­la­tions that hin­der the Amer­i­can econ­omy and to pro­mote eco­nomic growth,” La­bor Sec­re­tary Eu­gene Scalia said.

The In­ter­na­tional Fran­chise As­so­ci­a­tion wel­comed the new rule for clar­i­fy­ing the ques­tion of joint em­ploy­ment. The group ar­gues that the Obama ad­min­is­tra­tion’s pol­icy, im­ple­mented in 2015, re­sulted in a large in­crease in law­suits against fran­chise chains.

The Eco­nomic Pol­icy In­sti­tute, a pro­la­bor group, has ar­gued that the new rule “dra­mat­i­cally nar­rows” the like­li­hood that a com­pany can be con­sid­ered li­able for over­time or min­i­mum wage vi­o­la­tions.

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