Federal rule change targets rights of 1 in 5 workers

Officials who enforce recently enacted labor laws in Minneapolis and St. Paul are keeping an eye on new federal guidelines that could make it harder for workers in franchises, staffing agencies and subcontractors to recover stolen wages or remedy other abuses.

The rule, which will take effect in March, rolls back Obama-era guidance that gave workers more leeway to hold corporations liable for violations of federal minimum wage and overtime laws, even if they weren't directly on their payroll.

"By giving greater clarity to businesses who want to work together, we promote an entrepreneurial culture that has driven American prosperity for decades," Labor Secretary Eugene Scalia said in a news release announcing the change, which has been applauded by employers and organizations that represent them.

For their part, worker advocates say this is the latest step by the administration to erode employee protections.

"To us, it's another example of how the Trump administration is giving a gift to corporations and leaving workers holding the bag," said Cathy Ruckelshaus, general counsel at the National Employment Law Project.

By one estimate, one in five American workers will be affected by the change. The effect of the Trump administration's guidance is still unclear, however, in part because it's likely to face legal challenges.

"The regulation is a drastic departure from established case law, and so I think that's the reason that things are so unclear," said Jenn Round, a senior fellow at Rutgers University's Center for Innovation in Worker Organization. "Everybody who knows about this is in wait-and-see mode."

The Fair Labor Standards Act was passed in 1938, and in the decades since, legal interpretations by courts and presidential administrations have influenced how it's enforced. In 2016, President Barack Obama's Labor Department issued an interpretation of the law that broadly defined "joint employment," or when one worker has multiple employers — for example, a retail distribution center that contracts with a staffing agency — at the same time.

The Trump administration's interpretation of the law is narrower. It uses four factors to determine if a company is a joint employer: whether the company hires or fires employees, supervises and controls work schedules or conditions of employment, determines payment and maintains employment records.

The International Franchise Association, which represents about 1,400 brands, supports the new rule. There are more than 15,000 franchise establishments in Minnesota, according to the association.

"The previous joint employer standard, that expanded joint employer standard, had been a barrier to growth and expansion for both franchise brands and franchise owners," said Stephen Worley, the association's senior communications director.

David Weil, who issued the Obama guidelines as administrator of the Labor Department's wage and hour division, said the intent was "to make people aware of where they were and were not responsible for compliance with the law." Weil, who is now dean of Brandeis University's Heller School for Social Policy and Management, estimated that at least 20% of the workforce is affected by joint employment.

"If you're a worker in those situations, your protections really are importantly affected by whether all the people who are responsible for the workplace are going to be held accountable for compliance with the law," he said.

Authorities on federal labor policy say that while the new rule signals how the Trump Labor Department intends to handle worker complaints, courts will still have freedom to interpret the Fair Labor Standards Act, and local labor laws that go above and beyond federal law will still apply.

Low-wage workers in Minneapolis and St. Paul have alleged violations by franchises since the rollout of minimum wage and earned sick and safe time laws in both cities, but those laws don't explicitly define joint employment.

In St. Paul, the city Labor Standards Enforcement and Education division has its own criteria for identifying joint employers, including whether entities share common management or ownership, said Alex Dumke, a spokesman for the city's human rights department.

In Minneapolis, officials have relied on the Obama administration's interpretation of federal labor law to hold employers accountable, said Brian Walsh, director of the city's labor standards enforcement division. The Trump administration's rule could affect local enforcement, he said.

"It makes our jobs more difficult on a case-by-case level when we're negotiating with employers trying to resolve what we believe is a clear violation," Walsh said. "There may be attorneys representing larger employers who are completely legitimately pointing to guidance from the Department of Labor saying, 'Well, what are you talking about? My client has nothing to do with this situation.' "

Emma Nelson • 612-673-4509