The Trump administration has withdrawn Obama-era legal interpretations that said millions of American workers, from McDonalds cooks to Uber drivers, should be treated as employees of the corporations they work for.
One of the interpretations, written by the Department of Labor in 2015, said workers should be considered employees of a company if they are "economically dependent" on it — a definition that would include the independent contractors that power the gig economy. Another said fast food workers hired by franchise owners should be considered jointly employed by the food giants themselves.
When the Obama Labor Department first released the new definition of employees, it was seen as an attempt to rein in the trend towards classifying workers as independent contractors — a practice popular among startups like Uber, Lyft, Instacart and Postmates.
Christine Owens, the executive director of the National Employment Law Project, said in a statement that the change reflects the Trump Administration’s "willingness to take symbolic steps to attack workers – here, at the expense of additional clarity for all parties."
Palak Shah, the director of social innovation at The National Domestic Workers Alliance, echoed the idea that the Department of Labor's withdrawal muddies interpretation of employment law. "It makes it harder for employers to follow the law, harder for workers to thrive in this economy, and harder for the government to enforce the law," she said.
The Obama-era guidance on classification poked holes in arguments put forth by gig economy companies, which classify the people working on their platforms as contractors, according to Harvard Law professor Ben Sachs. But, he said, based on today’s withdrawal, it seems “the new DOL may pursue a difference course."
The "joint employer" guidance has also been deleted. The fast food industry celebrated the change on Wednesday, with the the International Franchise Association, a major industry group, calling the joint-employer guidance "one of the most costly and burdensome regulations impacting the franchise business model."
“While uncertainty surrounding the new joint employer standard has made it harder for America’s 733,000 franchise owners to grow and create new jobs, we are pleased the DOL is taking first steps to undue this costly regulation,” Matt Haller, the IFA’s Vice President of Public Affairs, in a statement.
While there are few immediate consequences of the change, it will almost certainly affect the outcome of cases now before the National Labor Relations Board, which concern whether parent companies like McDonald's are responsible for labor conditions at franchise locations, and what rights and benefits companies like Uber owe their drivers.
Alex Passantino, former Acting Administrator of the Labor Department’s Wage and Hour Division, said that the shift will likely result in "the Department of Labor pursuing fewer cases at the national level, and more cases ending at the local level, without efforts to pursue up-chain to a corporate franchisor or upper tier contractor."
He said that it signaled that the department under Trump will likely "give more respect to traditional business relationships than the previous administration."
The National Retail Federation, which represents the interests of companies that rely on contractors, was also pleased, calling the change "an important first step in reversing one of the most onerous regulations imposed by the previous administration on businesses.”
“Drastically expanding joint employer liability to hold one business responsible for the actions of another independent business, such as a subcontractor or franchisee, did nothing to protect employees and only created uncertainty that led to more growth-chilling litigation," said NRF President and CEO Matthew Shay in a statement. "Retailers hope Congress will build on this progress and put the issue to rest once and for all with clear, fair legislation defining joint employers.”
Caroline O'Donovan contributed reporting to this story.