A federal district court ruled that portions of the Trump Administration's revised "joint employer" rule violated the Administrative Procedure Act and conflicts with the Fair Labor Standards Act. The rule, which was designed to reverse an Obama-era rulemaking that expanded the universe of employees to whom employers have labor and benefits obligations, created a four-factor balancing test that narrowed the circumstances in which multiple businesses are jointly responsible for an employee.
Narrowing the joint employer standard has long been a goal of companies such as FedEx, Amazon, McDonald's and hotel operators that depend heavily on franchises or contractors. Under the Trump Administration rule, companies would be treated as joint employers of franchise and contract workers if they set their pay, and controlled hiring and firing processes, among other factors. The rule set aside ambiguous and hard-to-implement Obama administration guidance that the employment relationship hinges on "economic realities," such as the work being performed and companies' influence over the workplace environment.
The court declared the Trump rule's test for "vertical" joint employment arrangements (where an "intermediary" employer is the W-2 employer that pays wages / payroll taxes, but does not direct the day-to-day activities of the worker) was unlawful, but left in place the Trump Administration's test for "horizontal" joint employment (where multiple employers who are sufficiently associated with each other both benefit from an individual's work, such as two separate restaurants with the same ownership).
NATSO members are advised to consult counsel on the ruling's implications for their business or contact NATSO's Vice President of Government Affairs David Fialkov.
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