Labor Department returns to pre-Obama joint employment standards

A from the Labor Department is rolling back an Obama-era labor rule known for its nebulous conditions regarding employer liability

The current joint employer rule puts many businesses, including hotels, in tough positions due to its lack of clarity regarding who was liable in the event of employment and civil rights violations. The rule was expanded in 2015 to include cases where a company had “indirect control” over a workplace, rather than the previously stipulated “direct control.”

Now, the Labor Department is returning to pre-Obama rules, a move that is perceived as a major win for business groups and hotels.

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“U.S. Secretary of Labor Alexander Acosta today announced the withdrawal of the U.S. Department of Labor’s 2015 and 2016 informal guidance on joint employment and independent contractors,” the Labor Department’s statement reads. “Removal of the administrator interpretations does not change the legal responsibilities of employers under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act, as reflected in the department’s long-standing regulations and case law. The department will continue to fully and fairly enforce all laws within its jurisdiction, including the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act.”

It’s a decisive and unexpected move for the Department, as just yesterday a panel of industry lawyers stated their expectations that the current state of joint-employer laws would be up for review, but none were sure when.

“‘When is the National Labor Relations Board (an independent agency overseeing government law) overturning Obama-era policies regarding joint employers’ is a question I get weekly,” Christian R. White, counsel at hospitality law firm BakerHostetler, said during a panel on labor and employment issues. “The consensus is that [the decision] will be overturned, but… I see these decisions with us for a couple of years.”

The decision may be a surprise, but it is far from unwelcome. Chip Rogers, president and CEO of the Asian American Hotel Owners Association, wasted no time without chiming in with his support of the decision.

“This move by the Labor Department and Secretary Alexander Acosta is welcome and we applaud it. The informal guidance issued in the previous years only served to muddy the waters further for hard-working American business owners trying decipher the laws, rules, regulations and so-called ‘guidance’ coming out of the federal government,” Rodgers said in a statement released by AAHOA. “The withdrawal of the guidance on joint employment and independent contractors is a good first step in undoing the damage of the expanded joint employer standard established by the National Labor Relations Board in the Browning Ferris case. We’ll continue to fight for the franchise business model, which is responsible for creating millions of jobs and paving the way for tens of thousands of hoteliers to achieve the American dream.”

Despite the Labor Department’s reversal of its stance on joint employment law, the NLRB has yet to alter its interpretation of the law. The five-member board has two vacant seats and currently remains under Democratic control, stalling any decisions until elections take place in October.