On June 7, 2017, the Department of Labor (DOL) announced that they will be withdrawing the 2015 and 2016 informal guidance on joint employment and independent contractors.
What are the details of the informal guidance?
The informal guidance increased inspections for subcontractors and franchise businesses. It was put in place to hold parent companies liable for potential violations committed by the subcontractors or franchisees.
This expanded view had the potential to put more franchisees in joint control with the corporate franchisor. Also, it put more independent contractors under the indirect control of corporations.
Why is the policy being rolled back?
According to International Franchise Association (IFA) spokesman Matt Haller, the policy has made it harder for U.S. franchise owners to grow and create new jobs. He stated, “Locally owned businesses deserve as much clarity and certainty as possible so they can continue to create jobs and serve their communities, and we are hopeful that this effort led by the DOL will help produce that.”
What does this mean for the future?
Without this informal guidance, franchisees and franchisors are further separated regarding labor law accountability. Each franchise will now be more responsible for their own compliance and not jointly with the franchisor.
Also, it is important to note this change doesn’t change the legal responsibilities of employers under the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act.