The U.S. Department of Labor (DOL) announced Sept. 20 that its rescission of the prior administration’s joint employer rule would take effect Oct. 5 rather than the original rescission effective date of Sept. 28. We’ve gathered articles on the news from SHRM Online and other outlets.
In July, the DOL rescinded a final rule issued under the Trump administration that narrowed the definition of a joint employer under the Fair Labor Standards Act (FLSA). The rescission makes it more likely that an employer will be determined to be a joint employer and thus liable under the FLSA for another employer’s actions.
Under some circumstances, an employee of one company may be a joint employee of a second company, depending on the extent of control and supervision that one employer exercises over the employee. If the second company is a joint employer, both companies might be liable for minimum wages and overtime pay under the FLSA. A company’s staffing firms, subcontractors, franchisees or other affiliated companies might be joint employers.
The DOL announced Jan. 12, 2020, a final rule narrowing the definition of a joint employer under the FLSA to provide clarity to businesses about franchise and contractor relationships.
A federal judge in New York invalidated substantial portions of the DOL’s joint employer rule on Sept. 8, 2020. The judge ruled in favor of a coalition of state attorneys general who claimed that the rule weakens critical workplace protections. Among other arguments, the coalition said the rule conflicts with the protections Congress intended to provide under the FLSA and that the DOL violated the Administrative Procedure Act’s rulemaking process.
The legality of the rescinded Trump administration rule is pending before the 2nd U.S. Circuit Court of Appeals. By repealing the regulation, Biden administration attorneys may ask the judge to dismiss the case. Business groups that have intervened in the litigation to defend the rescinded rule may oppose such an effort. Reps. Virginia Foxx, R-N.C., ranking member on the House Education and Labor Committee, and Fred Keller, R-Pa., issued a statement urging the DOL to reinstate the rescinded rule.
Once the DOL’s rescission takes effect, courts are likely to return to the application of various — and not always consistent — multi-factor tests. This in turn means less certainty for employers as to when they may be liable for wage and hour violations under the FLSA as a joint employer of another company’s employees.