Workers could have more difficulty suing large companies for wrongdoing by contractors or franchisees under a rule announced on Sunday by the Labor Department.
Under the rule, which will take effect in March, employees of a fast-food franchise like a McDonald’s restaurant, for example, may struggle to win a legal claim against the parent company if a franchisee violates minimum-wage and overtime laws.
“This final rule furthers President Trump’s successful, governmentwide effort to address regulations that hinder the American economy and to promote economic growth,” Secretary of Labor Eugene Scalia said in a statement.
The rule, which the department proposed last April, fleshes out its position on a concept known as joint employment. It effectively replaces a more labor-friendly Obama-era approach that the Trump administration withdrew in 2017, one of several departures from the previous administration in the area of employment and labor law.
After the rule takes effect, it could limit the ability of millions of workers to recover wages they are owed.
The contractors and franchisees that directly employ workers often have limited resources to pay legal penalties and settlements, making the large upstream companies with whom these employers have a relationship a more practical target.
“This resolution provides much-needed clarity for the 733,000 franchise establishments across America,” said Robert Cresanti, the president and chief executive of the International Franchise Association, an industry group.
Advocates for worker have criticized the rule, arguing that it provides a road map of sorts for employers seeking to avoid liability for harmful practices.