Trump labor department pick signals pro-market stance on joint employer, independent contract rules

Keith Sonderling, Trump’s pick to deputy secretary of labor, the department’s second-ranking position, told the Senate Health, Education, Labor and Pensions Committee this week that the administration would restore previous rulemakings made during the first Trump administration protecting the so-called “gig economy” and clarifying the “joint employer” doctrine, which would protect corporations that franchise their brand.

“I do have a very strong record on this and what we did in the first Trump administration that I, of course, stand by,” Sonderling told Committee Chairman Bill Cassidy. Sonderling made the comment in regards to the independent contractor rule. He later said “the same analysis” applied to the administration’s stance on the joint employer issue.

The rules favored by the first Trump administration added much needed clarity to regulations that were becoming increasingly outdated by changes in the broader economy. The Trump-era rules allowed for new and innovative work arrangements that empowered workers while offering employers flexibility, stances CEI has long favored.

These pro-market stances will likely please the business community while frustrating unions, which oppose gig economy companies and favor the broadest interpretation of the joint employer rule. The Trump administration’s position on labor policy has been a wild card, due to unions attempting to make inroads to the GOP.

Sonderling’s announcements came on the same day that the committee approved Lori-Chavez-DeRemer to be the next labor secretary. Chavez-DeRemer was present at Sonderling’s committee hearing. Chavez-DeRemer has been a controversial pick by Trump, having previously supported pro-union legislation, but has more recently disavowed those positions and expressed views in line with Sonderling’s.

In Trump’s first term the Labor Department passed a rule clarifying when a worker is in fact an employee as opposed to an independent contractor, i.e., a freelancer. This matters because several federal workplace laws only apply to traditional employees. The federal government does not have a clear definition for an employer/employee relationship, instead allowing multiple factors to be considered, allowing regulators to judge matters on a case-by-case basis. Prior to the Trump administration, as many as six factors could be considered. None of the six were considered definitive, nor was any combination of them. The business community argued that this allowed ambiguity.

The Labor Department under Trump passed a rule winnowing the number of factors considered to just two: the degree of control the workers have and their opportunity for profit or loss from the work. The Trump administration argued that this brought clarity to the issue. The Biden administration undid that rule and restored the six factors, making them even broader in the process. The Biden rule change is currently being challenged in court and the Trump administration has signaled that it will not defend the Biden rule.

Sonderling said that while the issue was still currently in litigation, the administration was eager to take the “best path forward” once that was resolved.

The Trump administration also passed a rule clarifying the “joint employer” doctrine, which establishes that a business becomes liable for workplace violations at another business if it has control over the latter company. Traditionally this has required the first business to have direct control over the second one. The Obama and Biden administration both strived to extend this to “indirect control,” a term of art with no clear meaning that would allow regulators to assign penalties to any business that had any type of connection, however tangential, to any second business that broke the rules.

Sonderling again told Cassidy that the Trump administration that it still believed that the direct control standard provided “clarity” and used “factors that were easy to understand for both workers and employers.”