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DOL Joint Employer Final Rule Struck Down by Court

By: Mark Barnes

mbarnes@bugbeelawyers.com

In March, 2016, the Department of Labor (“DOL”) issued a final rule (“Final Rule”), narrowing the definition of joint employment under the Fair Labor Standards Act (“FLSA”).  The concept of “joint employment” renders more than one employer jointly and severably liable for damages for FLSA violations.  By way of example, primary contractors and sub contractors may be joint employers.  The same can be said about temporary agencies and the client employer.  The joint employer doctrine has been recognized by the DOL since 1939.  When the Final Rule went into effect, it established a 4-factor test for joint employer status, which primarily focused on the control purported employers had over employees.

 

After the Final Rule went into effect, 18 states sued to vacate the Final Rule, alleging it violates the Administrative Procedure Act (State of New York, et al. v. Scalia et al., Case No. 1:20-cv-01689).  The states and the DOL filed cross motions for summary judgment.  On September 8, 2020, the United States District Court for the Southern District of New York granted summary judgment in favor of the states and, in part, in favor of the DOL.  In significant part, the court held the Final Rule is inconsistent with the FLSA, striking it down as unlawful.

 

So, what does this mean for employers?  More than likely, it means employers are back to square one and operating under the older more expansive DOL standard, which focused the determination of employment and joint employment on the extent to which the employee depended economically on the purported employer.  Of course, the DOL may appeal the New York District Court’s decision.  Stay tuned.

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