Department of Labor Rescinds Final Rule on Joint Employer Status

You may remember us sending an HR Tip of the Week several months back describing a new Department of Labor (DOL) Final Rule on joint employer status under the Fair Labor Standards Act (FLSA). This was when the Trump Administration was still in office. Don’t feel badly if you don’t remember—the DOL has now issued a new Final Rule rescinding the previous one. The rescission is set to go into effect on October 5, 2021. Today we’ll be breaking down what exactly this means.

What is a “Final Rule,” anyway?

Once an administrative agency goes through the rulemaking process, it will issue a “Final Rule” to be published in the Code of Federal Regulations. It explains how the agency interprets a law, how the law will be implemented, and how the agency will enforce it.

Got it. So, what’s a joint employer?

A joint employer relationship exists when two entities are both considered an employee’s employer for purposes of worker protection laws. A common example of a joint employer relationship exists between a staffing agency and its client, as both could be seen as the employer of the employee (when certain conditions are met).

What was so bad about the previous Final Rule on joint employers?

The new DOL under the Biden Administration says that the previous Rule “improperly narrowed the test for vertical joint employment and conflicted with decades of Department interpretation, the text of the Fair Labor Standards Act, and Congressional intent.” Basically, the previous Final Rule made it too difficult for employees to prove an employer was liable under certain employee protection laws using a joint employer theory.

What’s the standard for proving joint employer status now?

This is still unclear. The DOL has not announced any plans to replace the previous Final Rule with a new one. That said, one of the issues with the previous Final Rule was that it required a showing that the alleged joint employer exercised actual control over the employee’s work, rather than the theoretical ability to control an employee’s work. So, we can expect that this theoretical right to control is a factor courts will likely consider going forward. Unfortunately, the way a court may apply a joint employer analysis can vary from jurisdiction to jurisdiction. As always, reach out to a Thompson Coe attorney for further guidance if you believe your company may be impacted by joint employer liability.

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