DOL Rescinds Trump Era Joint Employer Definition
August 3, 2021 – As expected, last week the U.S. Department of Labor (the “DOL”) rescinded a Trump era final rule which had narrowed the historical definition of “joint employer” under the Fair Labor Standards Act (the “FLSA”). By taking this action, the DOL has made it more likely employers will be classified as joint employers under the FLSA for the acts or omissions of another. Other government agencies, such as the NLRB, follow the same rule. The rescission will take effect on September 28, 2021. By taking this action the DOL returns the standard to the pre-Trump rule era.
Why business owners should care?
If a business is found to be a joint employer with a second company, then both companies could be liable for statutory violations. Common examples for joint employer allegations often occur with employees from staffing firms, subcontractors, franchisees, or other affiliated companies.
Under the Trump era rule, companies were considered joint employers only if they could hire and fire an employee, were able to substantially supervise and control an employee’s work schedule and conditions of employment, and if the company was able to set wages and method of payment for an employee and maintained employment records.
The Trump era rule also provided that certain factors should not be considered in a joint employer analysis, including (i) businesses operating under a franchiser/franchisee business model; (ii) a franchisor providing a standardized employee handbook to a franchisee; (iii) permitting a business to operate its own facility on the other company’s property, and (iv) a business establishing minimum wage, and harassment-free and other workplace standards for another’s employees. All this has been repealed.
Everything Old is New Again
Justification for the Change
Republican lawmakers and some legal scholars were in favor of the Trump era rule as its structure gave predictable standards and clarity for determining joint employer status. With its rescission, they believe there will be a return to confusion and uncertainty for business owners.
However, in the end the DOL believed that the now rescinded rule was contrary to the statutory language and the intent of Congress. They also believed it improperly limited the factors administrative agencies and the courts have historically used, and it failed to consider the years of DOL’s guidance on the topic.
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