Labor Dept Unveils Proposal on Contract, Franchise Worker Pay

President Donald Trump's administration on Wednesday moved to make it more difficult to hold companies liable when their contractors or franchisees violate federal wage laws.

The U.S. Department of Labor unveiled a proposed rule that would narrow the circumstances in which a business can ‌be considered the "joint employer" of another company's workers under the federal law requiring a ​minimum wage and overtime pay.

The rule is similar to one adopted by the department during Trump's first term that business groups backed but Democratic former President ⁠Joe Biden rescinded.

Acting Labor Secretary Keith Sonderling said the goal ​of the proposal was to make it easier for employers to comply with the law, ultimately benefiting ⁠workers.

"A clear standard on joint employment would give businesses more confidence to invest in partnerships, help employees understand their rights, and make the department’s investigations more efficient," Sonderling said in a statement.

The rule will guide the department's enforcement ‌efforts and could be cited in private lawsuits, though courts may not be bound ​to follow it.

The proposal ‌will be formally published on Thursday and the department will collect public comments for 60 days. A final rule could be adopted ‌this year.

Trump-appointed U.S. Labor Secretary Lori Chavez-DeRemer resigned this week amid allegations of misconduct, including claims she had an affair with a member of her security team and used department resources ⁠for personal trips. She did not address ‌the allegations in a statement ⁠announcing her resignation.

Joint employment has been one of the most debated topics in labor law over the last decade and ⁠the subject ⁠of numerous dueling rulemakings by agencies that enforce different federal laws.

The National Labor Relations Board, which is separate from the Labor Department and ‌enforces workers' rights to organize and join unions, in February repealed a Biden-era rule on joint employment and reinstated a test adopted during Trump's first term.

Like the labor board's standard, the Labor Department proposal says ‌companies are ​only joint employers if they exercise ‌direct control over hiring, supervision, pay, and employee records.

Worker advocacy groups have been critical of that approach. The Economic Policy Institute, a left-leaning group, said in 2020 that ​the rule from Trump's first term would make it more difficult to crack down on wage theft and cost workers more than $1 billion annually.