Court Invalidates Portion of Joint Employer Rule

The U.S. District Court for the Southern District of New York recently issued a decision in a case brought by 17 state attorneys general to block implementation of the Department of Labor’s (DOL) joint employer rule. (This rule establishes that an entity can only be a joint-employer if it actually exercises control over the essential terms and conditions of another employer’s employees. Click here for more information.)

The court invalidated the Trump administration’s regulation, determining that it had two major flaws:

• The DOL only considered the definition of “employer” when drafting its final rule, ignoring the relevance of the definitions of “employee” and “employ.” The final rule adopts its joint employment test based solely on the definition of employer, but all three definitions must be considered when determining joint employer status.
• The final rule uses different tests to determine a “primary” employer and a “joint” employer. The definition of a “primary” employer is broad under the Fair Labor Standards Act (FLSA), but the definition of “joint” employer used by DOL in the Final Rule was much more narrow. The court rejected the idea that there’s a distinction between the two and said the test for determining whether there is an employment relationship under the FLSA is the same whether it is a primary employment or joint employment relationship. In other words, DOL must rely on the broader employment test when determining joint employer status.

The court concluded, “There is thus no independent test for joint employment under the FLSA. An entity is an employer if it meets the FLSA’s definition. It is a joint employer if it meets the definition and another entity also meets the definition.” The DOL will likely appeal the decision and has 60 days to do so. Connecting the Dots will continue to monitor this litigation.