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The Biden administration on Thursday rescinded a Trump-era rule favored by employers that defined who should be considered a joint employer.
The DOL said in a statement Thursday that the rescinded rule included a description of joint employment that was “contrary to statutory langue and congressional intent” and “failed to take into account the department’s prior joint employment guidance.” The recission takes effect Sept. 28.
It said also that a 2020 ruling by the federal district court in New York, in New York v. Scalia, which is now being appealed to the 2nd U.S. Circuit Court of Appeals in New York, had vacated most of the rule. That case may now be declared as moot, said an attorney.
The issue of whom should be considered a joint employer has bounced back and forth depending upon the party of the administration in power.
In 2015, guidance on independent contractors issued under the Obama administration by then-DOL wage and hour administrator David Weil said some employees were being intentionally misclassified as a means to cut costs, and avoid compliance with labor laws.
The guidance said employers should use the FLSA’s definition of employee “as to suffer and permit to work” in applying an “economic realities test” in determining whether workers are employees.
In 2016, still under the Obama administration, the DOL said joint employment can be considered either “horizontal” or “vertical.”
It said horizontal employment should be considered when an employee is employed by two or more “technically separate but related or overlapping employers,” such as separate restaurants that share economic ties.
It said vertical joint employment happens in cases such as with staffing agencies when the “employee of the intermediary employer is also employed by another employer.”
In 2017, under the Trump administration, the department announced it was withdrawing the Obama administration’s joint employment and independent contractors guidances.
Now under the Biden administration, the rule has been changed yet again. The DOL’s Wage and Hour division Acting Administrator, Jessica Looman, said in the statement the division “will continue to follow the law and judicial precedent when evaluating joint employer relationships to enforce worker protections.”
The statement, said, “A strong joint employer standard is critical because FLSA responsibilities and liability for worker protections do not apply to a business that does not meet the definition of employer.”
Gerald L. Maatman Jr., a partner with the labor and employment practice of Seyfarth Shaw LLP in Chicago, who defends employers, said in a statement, “The action represents another move toward labor and employee interests, as it will open up new areas of potential liability for discrimination, wage & hour, and health & safety issues.”
However, Paul De Camp, a member of Epstein Becker & Green P.C., who is a past administrator of the DOL’s wage and hour division, said, “I don’t think the recission will mean a whole lot with respect to any particular workplace situation.”
He said, “The specific wording of the joint employment standard doesn’t make a lot of difference” in enforcement agencies’ and plaintiff attorneys’ case selection.
If the facts in a particular case are in the “gray zone,” he said, “that’s usually enough to allow” plaintiff attorneys and agencies “to go forward. I don’t think recission will have much of a practical impact on how these cases play out.”
He said most of these cases end up being settled or dismissed, and not litigated.
He said also the most recent rule “does move the needle on the argument” that the 2nd Circuit case will be declared moot.
The proposed joint employer regulation announced by the U.S. Department of Labor last week will give employers needed clarity and guidance if promulgated, say experts.