September 08, 2020

Strike 2: Judge Rules DOL’s Joint Employer Rule Invalid

First, a New York judge ruled on August 3rd that four provisions of the U.S. Department of Labor’s FFCRA regulations were invalid.  Then, on September 8th another judge from the same court (hmmm) ruled that one of two provisions of the DOL’s joint employer rule, the vertical joint employment rule, was invalid.

Background: The concept of joint employment has been around since 1939, the year after the Fair Labor Standards Act was enacted. How does it apply? If I work for Company A (a hospital) 35 hours a week and Company B (a long-term care facility) 15 hours a week, and those two companies are joint employers, someone owes me overtime! Or I work for a subcontractor on a new contract. My subcontractor-employer fails to pay me minimum wage for all hours worked. If the prime contractor is a joint employer with the subcontractor, I could sue both companies for back wages. That does not increase the amount of money to which I am entitled. It does increase the liability for the would-be joint employer. The “tests” for determining joint employment have been addressed at least six times through federal regulation, litigation (U.S. Supreme Court) and federal agency interpretation.

DOL’s Rule: On March 16, 2020, after receiving more than 57,000 comments on the proposed rule, the DOL effected yet another “final” joint employer rule. The new rule maintained the previous administration’s propositions of vertical and horizontal joint employment but narrowed how those relationships should be assessed.  The rule focused on the control and that a joint employer “must actually exercise – directly or indirectly” control over the worker. After the rule was published, 18 states filed a lawsuit challenging the DOL’s authority.

The Judge’s Decision: The judge found the DOL’s rule to be “arbitrary and capricious.” Some of its explanations were “thin gruel.” No court has ever used the DOL’s rationale, so that “dog has yet to bark.”  But the DOL’s “non-substantive” revisions to horizontal joint employer rule still stands.

Next Steps? Will the DOL file an appeal? Or will the DOL issue a new rule, like it just did with the FFCRA regulations? Stay tuned. In the interim, assess the relationship that your company has with affiliates and non-affiliate entities with whom you do business.  Are you a joint employer over workers that are placed in your workplace, or those of your client, by a temporary staffing agency?  If your customer or client a joint employer over your employee that you  place at the client’s site? Ask the same questions about other companies that provide services for you and the workers they employ to provide those services: cleaning, management, consulting, and more.

I wonder. As previously reported, the National Labor Relations Board’s (NLRB) final joint employer rule took effect April 27, 2020. It was similar to the DOL’s rule, referring to actual and direct control. How might this decision impact the NLRB’s rule, if at all? I find no lawsuit that has been filed against the NLRB. Could politics be at play? Hmmm.