The U.S. Department of Labor made a rule that would make it more difficult to sue corporations over violation of franchise wage laws.
The rule will make it even harder for employees of a franchise to claim their wage law rights when their companies violate such laws.
According to the report, the enforcement of the rule will begin from March this year. It would to the advantage of franchisors that have been sued recently by workers as a result of franchisees violations.
McDonald’s among high-profile defendants
When this new rule takes effect, McDonald’s Corp would be one of the franchises that would benefit. The company has faced lots of high-profile cases, where it claimed it is a joint employer for franchise workers.
In October last year, the company was found not guilty of wage law violation after court hearings on a lawsuit filed against the company. The Federal Appeals court in San Francisco found the company not liable for any violations relating to wage laws.
The new rule will foster improved economic growth
Eugene Scalia, U.S. Labor Secretary, stated that the new rule would allow President Trump’s administration to address regulations that prevent economic growth correctly. She said the administration is trying to provide greater clarity to organizations and businesses that want to work together.
And by doing so, the government would be promoting an entrepreneurial culture that has been the main driver of American prosperity for decades.
Worker Advocacy groups and Unions rejected the new rule when it was initially proposed by the Department last April. According to the labor union, the new rule would make companies avoid being held liable even when they have some degree of control over working conditions. Also, the union said it would prevent a lot of workers from getting their pay they were owed under the FLSA.
The rule excluding companies that hire contract labor
The new rule is a slight replica of the earlier four-part test that states when companies are regarded as joint employers. According to the rule, they are regarded as joint employers only if they can set pay, supervise, hire, fire, and maintain employment records. Under the new rule, contractual employers ware automatically excluded.
The initial rule from the Obama Administration had other factors, including whether the workers are a vital part of the company’s business as well as the type of work being performed. Most Franchises complained about the old rule and feared a spike in lawsuits.
The new rule released yesterday will be legally binding, unlike the Obama-era regulation that was not.