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Repeal of Trump-era joint employer rule nears as White House concludes review

The White House last week cleared the way for a repeal of the Trump administration’s standard for joint employment that many considered more business friendly.

The White House Office of Information and Regulatory Affairs on July 13 concluded its review [1] of the measure to rescind the joint employer rule, according to an online notice; this is the last step before it can be published by the labor department.

Precise timing for publication in the Federal Register wasn’t immediately clear, Bloomberg Law reported [2]. Once released, the measure would cement the Biden administration’s rollback of a signature Trump-era initiative aimed at giving corporations more clarity on how they can assert influence over their affiliated businesses, such as franchisees or subcontractors, without assuming responsibility over their payroll operations. Removal of the Trump standard would facilitate a return to the Obama administration’s approach, when the Labor Department increased its investigations and lawsuits alleging a lead employer shared liability over workers at affiliated entities.

Glenn Spencer, senior VP of the US Chamber of Commerce employment policy division, voiced concerns about potential changes to the joint employment rule in a letter [3] sent to the US Senate’s Committee on Health, Education, Committee on Health, Education Labor, and Pensions. The concerns centered around David Weil, President Biden’s nominee to head the Department of Labor’s Wage and Hour Division.

While serving as administrator of the Wage and Hour Division under former President Obama, Weil issued an Administrator’s Interpretation on finding joint employment under the Fair Labor Standards Act that determined a joint employment relationship existed even when one employer only had “indirect control” of the other employer’s employees, such as in a staffing arrangement where the so-called joint employer did not control work rules, hours, or wages of the staffing company’s workers.

The AI was rescinded by Labor Department under Trump and replaced by a regulation that reset the terms for joint employment to require actual control of another employer’s employees. That regulation is now in the process of being rescinded. “If confirmed, Dr. Weil would be able to promulgate a new regulation reflecting the definition of joint employment in the AI he issued,” the letter stated.

The rescinded rule “would have made independent-contractor classification far easier under federal law,” Mark Terman, an attorney with Faegre Drinker in Los Angeles, told the Society for Human Resource Management [4]. The rule would have primarily focused on who controls the work and whether the worker has the opportunity for profit and loss, Terman explained.

While the Labor Department, for now, will evaluate employment relationships under an established multifactor test, President Biden has advocated for a more-stringent standard. Weil has also called for a stricter test that would render most gig workers employees, SHRM reported. “Weil has made no secret of his belief that independent contractors used by many gig companies should be classified as employees,” said J. Hagood Tighe [4]. However, Congress isn’t expected to restrict the use of independent contractors by gig companies any time soon.

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