The U.S. Department of Labor rescinded an HR Policy-supported final rule that updated and modernized the Department’s joint employer standard. However, DOL did not replace the rule, leaving it up to the courts to decide the issue until new guidance is published.
DOL argues the previous 2020 rule is inconsistent with the FLSA’s text and purpose: According to DOL, “the [Trump administration’s] vertical joint employment analysis had never before been applied by [the Department's Wage and Hour Division], was different from the analyses applied by every court to have considered the issue prior to the Rule’s issuance, and has generally not been adopted by courts,” despite two district court decisions.
The final Biden administration rule is effective September 28, 2021.
Broader protection of employees claimed: According to the new leadership at DOL, rescinding the 2020 rule “will ensure more workers receive minimum wage and overtime protections of the Fair Labor Standards Act.” Yet, DOL fails to note that FLSA coverage of employees is not impacted by any joint employer rule. Instead, it determines the scope of companies responsible for ensuring FLSA compliance.
Outlook: It is unclear how an appeal pending before the Second Circuit Court of Appeals will be resolved after this rescission and how that decision could affect any future DOL rulemaking or guidance. However, the Department has clearly signaled that it intends to replace the rescinded rule with broader joint employer liability.