U.S. Department of Labor’s Rescission of the “Joint Employer Rule” – What Does This Mean for Employers?

On July 29, 2021, the U.S. Department of Labor announced a final rule to rescind (the “Final Rule”) the “Joint Employer Rule” under the Fair Labor Standards Act (FLSA) that took effect in March 2020.  The rescission becomes effective on September 28, 2021.   According to the announcement, by rescinding the Joint Employer Rule, the DOL “will ensure more workers receive minimum wage and overtime protections of the Fair Labor Standards Act.” 

According to the Final Rule, the DOL “will continue to consider legal and policy issues relating to FLSA joint employment before determining whether alternative regulatory or sub regulatory guidance is appropriate.”  In other words, new guidance could be forthcoming.  Until any such time, DOL’s Wage and Hour Division “will continue to follow the law and judicial precedent when evaluating joint employer relationships to enforce worker protections.”  Under such precedent, findings of joint employer status is more likely than under the March 2020 Joint Employer Rule.  Moreover, the “factors” for determining the existence of joint employer status are inconsistent across the federal judicial cicruits, and sometimes even within jurisdictions.  Recall that under the FLSA if two or more entities are found to be joint employers, they are jointly and severally liable for any FLSA violations.

In preparation for the September 28th rescission, companies should re-examine their relationships with contractors from whom they receive services and tighten up any contract language and adjust any behaviors that could expose them to joint employer liability.  During this re-examination, companies should also evaluate potential exposure under any applicable state law(s).