The US Department of Labor is developing a new regulation on joint employment under the FLSA, a possible first step towards reversing the Trump administration’s business-friendly rule on the joint employer standard.
First Public Notice of Possible New Regulation
On February 23, the White House Office of Information and Regulatory Affairs (OIRA) posted on its website that the proposed rule, Joint Employer Status Under the Fair Labor Standards Act, is pending regulatory review.
The proposed rule must receive sign-off from OIRA before it is released, so we don’t know the substance of the rule for certain. However, as we blogged about in November, we expect the Biden administration to reverse the Trump administration’s March 2020 final rule on joint employment under the FLSA. That rule incorporated a narrow definition of “joint employer,” limiting the circumstances under which multiple companies could be deemed to “employ” the same workers (and consequently minimizing companies’ joint employer liability).
The Previous Administration’s Business-Friendly Rule
The Trump DOL’s rule ran into trouble in September 2020, when a New York federal district judge struck down much of the rule (see our blog, here). The DOJ appealed the decision to the Second Circuit and filed a brief supporting the legality of the rule on January 15, 2021-less than a week before Biden’s inauguration-creating an obstacle for the Biden administration to walk away from defending the regulation by way of litigation.
However, the rule can be rescinded through rulemaking, and it appears the Biden DOJ is beginning down that path. Whether the new proposed rule will seek to fully rescind the Trump administration’s rule, to replace it with an interpretation widening the scope of when multiple businesses are jointly liable under the FLSA, or to promote another approach, remains to be seen.
Check back for updates as the Biden administration continues to move forward with what we expect to be widespread change in the labor and employment landscape. For help navigating the latest developments or for a joint employment audit to understand your company’s level of risk, contact your Baker McKenzie employment attorney.