On Wednesday, the Department of Labor (DOL) announced that it is withdrawing two Obama-era interpretive guidance letters that expanded a company’s liability for violation of certain federal labor laws. Historically, companies were only considered joint employers liable for labor violations affecting employees of another entity, if they exercised direct control over those persons. Under the 2015 and 2016 letters, DOL took a more expansive view, concluding that a joint employment relationship exists even in situations where a company exercises indirect control over another employer’s workers.

This interpretation had the most impact on franchisors. For example, if a franchisor provided training and guidance for franchisees as to how to schedule and structure the working relationship with their employees, DOL concluded that the franchisor could be sued by the franchisees’ employees for violations of the Fair Labor Standards Act and other laws. Business groups opposed this expansion, and the withdrawal represents the Trump administration’s recognition of these concerns.

DOL’s action does not end all application by government agencies of the expanded joint employer rule. The National Labor Relations Board (NLRB) adopted a similar test with regard to employee organizing and concerted activity rights. President Trump has so far failed to fill several NLRB vacancies that could result in an eventual reversal of this position. Until that point, determinations of joint employer liability may depend on the agency and specific statute involved.