As anticipated and reported in a prior blog discussing action items on President Biden’s agenda, and as foreshadowed by the Notice of Proposed Rulemaking issued by the U.S. Department of Labor (DOL) in March, 2021, the DOL on July 30, 2021 withdrew the prior Joint Employer Final Rule that was published during the Trump administration, and which had been in effect since January, 2020. The Recission of the Final Rule takes effect on September 28, 2021.
Under the Final Rule published during the Trump administration, the decision of whether an employee was jointly employed by two or more employers was determined by analyzing the extent to which an alleged employer was involved in the following four employment actions:
1) the hiring and firing of the employee
2) the supervision and control of the employee’s work schedule or conditions of employment
3) the determination of the employee’s rate of pay and the employee’s method of payment
4) the maintenance of the employee’s employment records.
The Trump Final Rule also focused on whether there was actual, rather than theoretical, control over the above factors. This Final Rule had been successfully challenged by a number of states, with the S.D. N.Y. vacating the Final Rule in September, 2020, on the basis that it conflicted with the Fair Labor Standards Act (FLSA) and violated the Administrative Procedures Act. The court also stated that it was arbitrary and capricious since the Final Rule did not adequately explain the change from prior DOL interpretations. State Of New York et al v. Scalia, No. 1:2020cv01689 (S.D.N.Y. 2020). While the DOL appealed the decision of the S.D.N.Y., it noted in its appeal that its then proposed rulemaking would likely moot the appeal.
With the recission of the Trump Final Rule, the DOL is not proposing a new rule or guidance, but rather reverting to the rules in place under the FLSA and court decisions prior to January, 2020, namely whether there is joint employment depends upon a number of factors under an “economic realities” test, such as the nature of the work being performed, whether the workers are integral to a company’s business, and whether the companies could potentially control the worker’s working conditions.