Federal Court Strikes Down Part of the DOL Joint Employment Rule

On Sept. 8, 2020, a federal district court struck down parts of the U.S. Department of Labor (DOL) joint employer rule. This new rule became effective March 16, 2020. The district court judge found that the current DOL test was inconsistent with the Fair Labor Standards Act (FLSA) and failed to justify or account for its costs to workers.

Joint Employment

Joint employment situations arise when two or more organizations share the control and supervision of one or more employees. A joint employer can be an individual, partnership, association, corporation, business trust, legal representative, public agency or any organized group of persons, excluding any labor organization (other than when acting as an employer) or anyone acting in the capacity of officer or agent of a labor organization.

The DOL holds joint employers equally and individually responsible for compliance with labor and employment laws. The DOL looks at joint employment situations to prevent scenarios where one organization avoids complying with labor standards by using another employer as a “shield.”

Action Steps

• Employers should become familiar with the DOL joint employment rule and the district court’s decision and identify any co-employment situations within their workforce that may have been affected.
• The DOL is currently evaluating their legal options to respond to this judicial decision. Employers should continue to monitor the DOL website for guidance and developments on the joint employment rule.

Highlights

• The DOL recognizes two types of joint employment—horizontal and vertical.
• Vertical joint employment is the most common scenario.
• A federal district court ruling vacated the DOL’s test for determining vertical joint employment.
• The test for determining horizontal joint employment remains in force.
• The DOL is currently considering its options to challenge the lower court’s ruling.

Important Dates

Jan. 12, 2020

DOL announced new joint employment rule.

March 16, 2020

DOL joint employment rule became effective.

September 8, 2020

Federal District Court for the Southern District of New York vacated vertical joint employment standard.