Deregulation has been the unsung economic success story of the Trump administration. Today the Labor Department adds its “joint employer” rule to the long list of deregulatory wins. When joint employment exists, two separate companies are responsible for ensuring that workers receive the federally mandated minimum wage and overtime pay. Two companies are responsible for ensuring the proper records are kept. And two companies can be taken to court if it’s alleged that those responsibilities have not been met.
Joint employment occurs, for instance, when an office contracts for janitorial services with an outside vendor, then closely supervises the workers and their schedules. But when companies are wrongly deemed joint employers, it saddles them with compliance costs that should be borne by only one.
That’s what happened during the Obama administration. A 2016 legal interpretation adopted by the Labor Department and a 2015 ruling by the National Labor Relations Board dramatically expanded joint employment. The White House Council of Economic Advisers estimates that the Obama-era rules threatened annual net costs of $5 billion, and a reduction in real income of about $11 billion.
The new rule we’re introducing updates one from 1958, which said joint employment exists when two employers are “not completely disassociated” from each other. Little explanation was given for that legal test, leading to uncertainty, unnecessary litigation and divergent standards in different federal courts.
The department’s new rule draws on leading court decisions to codify reasonable, familiar standards for determining joint-employer status. Companies will now have greater certainty about the point at which they’re affecting the terms and conditions of employment to such a degree that they’re an employer, responsible for ensuring employees receive the minimum wage and overtime pay.
The new rule also gives companies in traditional contracting and franchising relationships confidence that they can demand certain basic standards from suppliers or franchisees—like effective antiharassment policies and compliance with employment laws—without themselves being deemed the employer of the other company’s workers. That will help companies promote fair working conditions without facing unwarranted regulatory costs.
By removing uncertainty for these businesses and their workers, this rule also benefits the economy more broadly. Every dollar lost by business to vague or unnecessary regulation is a dollar less for creating jobs, increasing wages, funding retirement plans, or lowering prices.
Actions like the new joint-employer rule demonstrate a core conviction of President Trump and his administration: Smart deregulation is good for the American worker, business, families and the economy. When we lift the heavy hand of government and allow businesses to create jobs, enter new markets, and compete at lower prices, every American wins.
Mr. Mulvaney is President Trump’s acting chief of staff. Mr. Scalia is labor secretary.
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January 13, 2020 at 04:00AM
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Making Labor Rules Rational Again - Wall Street Journal
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