Dive Brief:
- A federal district court judge vacated the "vertical" relationship portion of the U.S. Department of Labor's joint employment rule Sept. 8 (State of New York, et al. v. Scalia, No. 1:20-cv-01689 (Sept. 8, 2020)).
- The agency in January narrowed the criteria for finding that separate employers can be jointly liable for Fair Labor Standards Act (FLSA) violations. A group of states sued, alleging, among other things, that the rule was inconsistent with the statute.
- The judge agreed, voiding the portion of DOL's regulations that addressed vertical relationships, such as those involving staffing companies or subcontractors. The court, however, allowed the agency's "horizontal" rule to stand, which regulates situations in which an employee has a relationship with two associated employers.
Dive Insight:
The January regulations, according to a DOL fact sheet, provided a four-factor balancing test to determine when a person is acting directly or indirectly in the interest of an employer in relation to the employee and also clarified that an employee's "economic dependence" on an employer does not determine whether it is a joint employer under the FLSA.
The change came after employers requested clarity on the issue. Various courts and jurisdictions maintain disparate joint employment tests, and some stakeholders have long pushed for a streamlining of those tests. Some even called for congressional intervention, asking lawmakers to adopt one test for several laws, most notably the FLSA and the National Labor Relations Act.
DOL's FLSA rule generally was considered employer-friendly, although some in the business community questioned whether it left too much room for judicial interpretation.
"The Department is disappointed in the decision and will review and evaluate our options with the Department of Justice," a DOL spokesperson said.
