Department of Labor Plans to Rescind the Latest Joint Employer Rule

On March 11, 2021, the U.S. Department of Labor (DOL) gave notice that it plans to rescind the Joint Employer Final Rule published last year. The Final Rule approved under the Trump Administration set out a four-factor test to determine whether an employer was a joint employer and therefore jointly liable under the Fair Labor Standards Act (FLSA). This post will review the Final Rule, consider next steps in the DOL process to rescind a rule, and discuss what employers should expect when it comes to a new Joint Employer Rule.

2020 Joint Employer Rule

In January 2020, the Trump DOL finalized the 2020 Joint Employer Rule. The Rule went into effect in March 2020. The 2020 Rule was a narrowing and clarification of the joint employer test and received strong support from the business community. Under the 2020 Rule, the DOL advocated use of a four-factor test to determine whether an employee was jointly employed by two or more employers. According to the Rule, the relevant factors to consider are (1) whether the company can hire or fire the employee; (2) whether the company supervises the employee's work schedule or conditions of employment; (3) whether the company can determine the employee's pay; and (4) whether the company maintains the employee's employment records. When considering these factors, actual exercise of control is most important, not just theoretical access. The Final Rule also made clear that there is no single dispositive factor in determining joint employer status; the factors must be balanced.

After the Final Rule was published, 18 states challenged it in federal court suing to have the Rule vacated. The lawsuit is pending and is one of the reasons cited by the DOL for rescinding the Rule.

Next Steps in DOL Process

The DOL's proposal to rescind the Joint Employer Final Rule is open for public comment until April 12, 2021. After the public comment period has concluded, the DOL will review submissions and make a final determination regarding the Rule's rescission. The DOL is not proposing alternative regulatory guidance at this time but may do so in the future. If the 2020 Rule is rescinded without new guidance issued, then joint employer guidance will return to standards existing before the 2020 Rule went into effect.

The previous Rule was established during the Obama administration and is a broader approach to joint employer liability. Under the previous guidance, which was withdrawn by the Trump Administration in 2017, joint employment could be established if there was a relationship between the business and the economic dependence of the worker.

What Employers Should Expect on a Future Joint Employer Rule

Employers should be prepared for the current administration to have a much broader interpretation of joint employment. Organizations should evaluate indirect employment relationships—like contracted service providers or franchisees—to assess whether they are at risk of being considered joint employers and potentially liable under FLSA. Employers with specific questions on the Joint Employer Rule and how it may apply to their business should contact experienced counsel for legal guidance.

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Featured ImagebyRebecca Sidebotham.