The Trump administration made it harder for workers to sue parent companies. A judge called the new rules “flawed in just about every respect.”

By Mike Pomranz
September 18, 2020
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When you eat out at a fast food restaurant like McDonald’s, it’s extremely unlikely that you think about which franchisee owns that particular location. A McDonald’s is a McDonald’s, they all have Spicy McNuggets, and that’s pretty much all you care about. So when it comes to employees of these chains, why should things be any different?

Admittedly, that’s an oversimplification of how franchised businesses work, but it’s not far off from a recent federal court ruling deciding that, indeed, employees of franchisee-owned locations of a chain should be able to sue the brand’s parent company in disputes over things like minimum wage or overtime payments.

McDonald's employees and supporters protest outside a McDonald's in Los Angeles, California, April 6, 2020 demanding pay for quarantine time and healthcare for workers who get sick from the coronavirus that causes COVID-19.
ROBYN BECK / Contributor/Getty Images

Last Tuesday, U.S. District Court Judge Gregory H. Woods overturned a rule enacted by the Department of Labor in January which limited the definition of a “joint employer”—a distinction necessary to sue a parent company—calling the new policy “flawed in just about every respect,” according to the New York Times. In February, attorneys general from 17 states and the District of Columbia sued to stop the new Trump administration rules, with New York Attorney General Letitia James stating that they “would result in lower wages and additional wage theft targeting lower- and middle-income workers.”

“Over the past few decades, businesses have increasingly outsourced and subcontracted many of their core responsibilities to intermediary entities, instead of hiring workers directly,” the New York Attorney General’s office explained when the suit was announced. “Because these intermediary entities tend to be less stable, less well-funded, and subject to less scrutiny, they are more likely to violate wage and hour laws. In [our] suit, the coalition argues that USDOL’s new rule provides an incentive for businesses to offload employment responsibilities to smaller companies, which, under the new rule, will shield them from federal liability for wage and hour obligations under the FLSA.”

A Labor Department spokeswoman told the New York Times that the decision was disappointing; it appears likely that the department will appeal the ruling. Still, in the meantime, the decision will empower thousands of workers in the fast food industry who maybe be selling you “Burger King” French fries but are technically employed by franchises much smaller than the nationally-known brand.