On March 11, 2021, the U.S. Department of Labor (DOL) announced a proposal to rescind the 2020 Joint Employer Determination Rule (the Rule). Joint employment or co-employment situations arise when two or more organizations share the control and supervision of one or more employees.
Joint employers are equally and individually responsible for compliance with labor and employment laws, including the Fair Labor Standards Act (FLSA). The DOL looks at joint employment situations to prevent scenarios where one employer uses another as a “shield” to avoid compliance obligations.
The DOL has proposed rescinding this Rule because it determined the Rule goes against longstanding agency interpretations and court rulings. The DOL has stated that the Rule requires using a test that is “unduly narrow” and that withdrawing it would “improve well-being and economic security” by providing stronger protections for workers.
The DOL also considered that, in 2020, 17 states and the District of Columbia filed a lawsuit challenging the validity of the Rule. The court vacated most of the Rule, stating that it was “contrary to the FLSA” and “arbitrary and capricious” because it failed to explain why the Rule deviated from prior guidance on the subject.
Next Steps for Employers
At this stage, rescission of the Rule has only been proposed and is not final, and it is currently unknown whether the proposal will simply rescind the previous administration’s joint-employer rule or amend the current rule. The DOL will review and consider public commentary on this matter which closed on April 12, 2021.
In the interim, the Rule is still in effect and employers must continue to comply with the Rule. However, employers are encouraged to continue to monitor DOL communications for any developments on this proposal.
HR Works will also continue to monitor any developments and provided updated information as it become available.