On July 29, 2021, the U.S. Department of Labor filed a final rule rescinding the Trump-era “Joint Employer Status Under the Fair Labor Standards Act” rule (29 CFR part 791), which went into effect on March 16, 2020.
The Trump-era rule implemented employer-friendly Fair Labor Standards Act regulations. It established two standards for determining whether employers were joint employers for purposes of the FLSA: a Vertical Joint Employment Standard and a Horizontal Joint Employment Standard. The Vertical Standard applied a four-factor test to determine whether a purported joint employer was acting directly or indirectly in the interests of the employee’s recognized employer. The Horizontal Standard (which was largely consistent with prior DOL guidance on the joint employer issue) looked to whether purported joint employers were acting independently of each other, or were “sufficiently associated” with each other with respect to the employment of the employee.
The DOL noted that the Southern District of New York recently decided to vacate the Vertical Standard portion of the rule (on which we previously reported). In similar fashion, the DOL rescinded the Vertical Standard, reasoning that the Vertical Standard had never before been applied by the Wage and Hour Division, it was inconsistent with the joint employer analyses applied by courts, and had thus far not been widely adopted by courts. The DOL further reasoned that the Horizontal Standard was “intertwined” with the Vertical Standard and, even though the Horizontal Standard was largely consistent with prior DOL guidance, rescinded it, along with the entire Trump-era rule.
The DOL’s rescission of the rule is a continuation of the Biden administration’s efforts to roll back many employer-friendly changes implemented by the Trump administration. We will continue to provide updates as those roll backs occur.